The country still lacks well-defined and uniform rules and regulation to deal with the gratuity issue.
The issue of gratuity fund still remains as mostly an unregulated area to guide the corporate sector and other entities for following a uniform set of rules.
The country's corporate sector has been forming the gratuity fund for employees on their own capacity in line with the Trust Act-1882, Labour Law-2006 and Income Tax Ordinance-1984.
Three laws do not have adequate provisions to help formation of gratuity funds.
The Labour Law has stipulated minimum payment condition in the gratuity fund considering protection of labour rights.
Taxmen and lawyers said absence of a maximum ceiling of receipt of gratuity may create scope for tax evasion.
"Gratuity fund is contributed by the employer. If any company desires, it can keep basic salary as per its will to enjoy the tax-free benefit," said Advocate Jafrul Hasan Sharif, an expert on labour law.
Mr Sharif was a member of the drafting committee of Labour Law-2006 and was also involved with its amendment in 2013.
Misuse of the gratuity fund may happen as there is no specific law for gratuity, he added.
"There were some guidelines in the Labour Law on formation of gratuity fund that was scrapped in 2006," he said.
A maximum-level contribution to the gratuity fund and minimum time-period for being entitled to the fund should be defined clearly, Mr Sharif said.
Currently, corporate taxpayers have to obtain an approval from the concerned tax commissioner on a trust deed to obtain tax-exemption facility on the fund.
The government for the first time in Finance Bill-2015 proposed to set a tax-free ceiling at Tk 25 million for recipient of gratuity fund.
Earlier, the entire amount of the gratuity fund was exempted from payment of income tax.
In the latest budget, neighbouring India also kept Rs 1.0 million tax-free or 15 days' salary for each completed year of service in the gratuity fund.
However, India has a separate Gratuity Act-1972 which has been followed by both private and public sectors.
Tax officials said the trust deed explains how a company would operate the gratuity fund, for what period and how much would be paid by the employer.
Aminur Rahman, former income tax member, said the Labour Law has protected the interest of workers but tax law must have the provision.
"Companies prepare their own rules for gratuity fund which varies for one company to another," he added. A uniform guideline on gratuity fund can provide a common platform for companies, he added.
Tax officials said they have identified some high-salaried people in banks and companies who have been receiving a handsome amount as gratuity fund. There was no ceiling or tax-exemption limit for the recipient of the fund.
"We are not empowered by the law to disallow an application for gratuity fund if any company offers the fund for its employee for several months in a year," said a senior tax official.
As the fund was completely tax-free, the tax officials only followed the existing rules of the income tax law for giving approval of the fund, he added.
According to the Income Tax Ordinance-1984, a company will have to employ at least 90 per cent of its employees who have to be Bangladeshi, conduct businesses and pay the gratuity amount to the employees in Bangladesh for obtaining approval of the taxmen.
Also taxmen should be informed in writing in case of any change or amendments made to the trust deed of gratuity fund.
Tax officials said taxpayers who fall under 30 per cent ceiling with Tk 47,50,000 annual income may come under the new tax measure on gratuity fund.
Former vice president of the Institute of Chartered Accountants of Bangladesh (ICAB) Shahadat Hossain said, "There is a need for a law on gratuity to make the process concise and uniform."
Currently, many of the private companies do not follow the gratuity rule properly as there is no such law to monitor the process, he said.
It should be clearly mentioned in the law as to how many employees are going to retire every year and how to form a board of trustees for maintaining a proper accounting system, he said.
The existing provision on gratuity fund is insufficient in the Labour Law to guide the corporate sector.
In 2013, the cabinet approved the Bangladesh Labour (Amendment) Act-2013, specifying claim of gratuity for the workers.
As per the amended law, all of the workers who have been working up to 12 years in a factory will get one month's basic salary as gratuity for each year.
The amount of gratuity will be increased to one-and-a-half months' basic salary for those workers who have been working for more than 12 years in an industry.
Those workers who have been working for at least six months to one year will also get one month's basic salary as gratuity.
The Labour Law-2006 defines 'gratuity' as wages payable on termination of employment of a worker which shall be equivalent to not less than 30 days' wages for every completed year of service or for any part thereof in excess of six months; it shall be in addition to any payment of compensation or payment in lieu of notice due to termination of services of a worker on different grounds.
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