Retirement Benefit 2026
GRATUITY LIMIT HIKE 2026
Revised Ceiling ₹25 Lakh & Death Gratuity
(Max Limit: ₹20 Lakh se badhkar ₹25 Lakh!)
As of January 2026, the maximum limit for Retirement Gratuity and Death Gratuity has been enhanced by 25% after the Dearness Allowance (DA) crossed the 50% threshold. The 8th Pay Commission is expected to further revise this ceiling to ₹30 Lakh to align with the new Basic Pay structure.
⚖️ The 50% DA Rule
Under the 7th CPC recommendations, whenever DA crosses 50%, the Gratuity ceiling automatically rises by 25%.
Old Limit: ₹ 20,00,000
New Limit (Current): ₹ 25,00,000
Gratuity Ceiling: 7th vs 8th CPC
| Parameter | 7th CPC (Base) | 8th CPC (Projected) |
|---|---|---|
| Max Gratuity Limit | ₹ 20.00 Lakh | ₹ 30.00 Lakh* |
| Tax Free Limit | ₹ 20.00 Lakh | ₹ 25.00 Lakh (Interim) |
| Death Gratuity | Based on Length of Service | Max 33 Times of Basic Pay |
*If the 8th CPC adopts the same indexation formula, the limit may be reset to ₹30 Lakh.
💡 Key Points to Note (Calculation Rules):
- Calculation Formula: Retirement Gratuity = (1/4) x Basic Pay x Total Qualifying Service (in six-monthly periods). It is roughly 15 days’ salary for every completed year of service.
- Death Gratuity: If an employee dies in service with >20 years of service, the family receives 33 times the Basic Pay (subject to the ₹25L cap).
- Qualifying Service: A fraction of a year equal to 3 months and above is treated as a completed 6-monthly period.