Major Decision by Modi Government on Gratuity: No Tax Up to 25 Lakhs

In a recent Cabinet meeting, a significant decision was made regarding gratuity. The Modi government has increased the tax-free limit for gratuity to 25 lakhs. Now, no tax will be levied on gratuity amounts up to this limit, whereas previously the limit was set at 20 lakhs. The CBDT had increased the tax-free gratuity limit from 10 lakhs to 20 lakhs in a notification dated March 8, 2019.

4% Hike in Dearness Allowance

In addition to this, approval has been granted for an increase in dearness allowance for central government employees and pensioners. The Central Cabinet has approved a 4% increase in dearness allowance, bringing the total dearness allowance to 50%. This dearness allowance will be applicable from January 1, 2024, and will be credited along with the March salary. Arrears for two months will also be included in this. This marks the fourth consecutive increase in dearness allowance by 4%, leading to a burden of 12,868.72 rupees on the government treasury.

 

DA to Become Zero After 50%

From January 2024, central government employees will receive 50% dearness allowance. However, after reaching this threshold, dearness allowance will be reduced to zero. After this, the calculation of dearness allowance will start from zero. The 50% dearness allowance will be added to employees’ basic salary. For instance, if a employee’s minimum basic salary is 18,000 rupees, then 50% of this, which is 9,000 rupees, will be added to their salary.

source https://avsarhub.com/major-decision-by-modi-government-on-gratuity-no-tax-up-to-25-lakhs/