Hike in gratuity amount deferred: What it means for your financial planning

Private sector and government employees must review their retirement portfolio and track EPFO's announcements

A decision by the Employees' Provident Fund Organisation (EPFO) to defer a hike in retirement and death gratuity is said to be disheartening for government and organised sector employees. "This decision comes just a month after the EPFO announced a significant 25 per cent hike, raising the gratuity amount from Rs 20 lakh to Rs 25 lakh," says Harshita Agarwal Sharma, director of Lexlevel Services.

"Taxation of gratuity for government and organised sector employees is based on specific provisions of the Income Tax Act, 1961, and the legislative framework laid out in the Payment of Gratuity Act, 1972. The interpretation