The Dearness Allowance (DA) for Central Government employees has crossed 50%, leading to an increase in gratuity for those retiring on or after January 1, 2024.
The maximum gratuity amount has been raised to ₹25 lakh, up from ₹20 lakh.
While Central Government employees enjoy this gratuity tax-free, private sector employees still have a tax-free gratuity limit of ₹20 lakh.
New Gratuity Rules Announced
The Department of Pension and Pensioners Welfare, under the Ministry of Personnel, Public Grievances, and Pensions, has confirmed the increase in gratuity limits.
The decision is based on the 7th Pay Commission’s recommendations, implemented after the DA reached 50%.
Under the updated Central Civil Services (Pension) 2021 rules, the limits for retirement and death gratuity have been raised by 25%, effective January 1, 2024.
What Is Gratuity?
Gratuity is a one-time financial benefit given to employees as a token of appreciation for their service.
It is paid when an employee retires, resigns after completing at least five years of continuous service, or in cases of death or disability.
Though gratuity is part of an employee’s salary, it is paid as a lump sum rather than regularly.
How Gratuity Is Calculated
Gratuity is calculated based on the employee’s monthly salary.
Employees must complete at least five years of continuous service, except in cases of death or disability, to qualify. For calculation purposes, 240 working days are counted as one year.
Employees are eligible for gratuity under these conditions:
Retirement from service
Voluntary resignation after five years of service
Death or disability due to illness or accident
Demand for Changes in Gratuity Calculation
In a pre-budget meeting with Finance Minister Nirmala Sitharaman, trade union representatives proposed changes to gratuity calculations.
They suggested increasing the calculation basis from 15 days’ salary per year of service to one month’s salary per year.
This change aims to ensure higher gratuity payouts, providing more financial security for employees after retirement.
