Retirement Update
GRATUITY RULES 2026
(New Limit ₹25 Lakh & Death Rates)
(The lump-sum reward for your lifetime service)
⚡ Quick Answer: What is the New Limit?
Since Dearness Allowance (DA) crossed 50%, the maximum limit for Retirement and Death Gratuity has been increased by 25%. The new ceiling is ₹25 Lakhs (effective from Jan 1, 2024).
⚠️ Eligibility: You must complete at least 5 Years of Qualifying Service to be eligible for Retirement Gratuity. (Note: No minimum service required for Death Gratuity).
📢 Share with Retiring Colleagues:
Gratuity is often called the “Golden Handshake.” It is a tax-free lump sum paid by the government to thank you for your service. However, the rules for “Retirement” and “Death” are completely different. Also, PSU/Bank employees should note: This ₹25 Lakh limit applies strictly to Central Govt employees (unless your specific board has adopted it).
Jump To:
Retirement Calculation
|
Death Gratuity Slabs
|
Nomination Trap
1. Retirement Gratuity (The Formula)
If you retire after 5 years of service, you get:
🧮 Calculation Formula:
Gratuity = (1/4) × Emoluments × Qualifying Service (Six-Monthly Periods)
*Maximum Cap: 16.5 times of Emoluments OR ₹25 Lakhs (whichever is lower).
*Emoluments: Basic Pay + Dearness Allowance (DA) on the date of retirement.
2. Death Gratuity Rates (Higher Payout)
If an employee dies while in service, the family gets a much higher amount. The “5-Year Service” rule does NOT apply here.
| Length of Service | Death Gratuity Rate |
|---|---|
| Less than 1 Year | 2 times of Emoluments |
| 1 Year to 5 Years | 6 times of Emoluments |
| 5 Years to 11 Years | 12 times of Emoluments |
| 11 Years to 20 Years | 20 times of Emoluments |
| 20 Years & Above | 33 times of Emoluments (Max ₹25 Lakh) |
3. The Resignation & Nomination Trap
Resignation Rule
If you resign, you get Service Gratuity only if you have < 10 years of service.
If > 10 years, resignation entails forfeiture of past service (and thus Gratuity), unless it is a “Technical Resignation” to join another Govt job.
Nomination (Form 1)
Critical: Ensure your “Common Nomination Form” is updated in your Service Book.
Without a valid nomination, your family will face legal hurdles (Succession Certificate) to claim Death Gratuity.
📥
Official Reference (DoPPW):
🧮 CALCULATE YOUR GRATUITY:
❓ Gratuity Common Questions
Is the ₹25 Lakh limit for Banks/PSUs?
Not automatically. This order applies to Central Govt Employees covered under CCS (Pension) Rules. PSU/Bank employees are governed by the “Payment of Gratuity Act, 1972” (current statutory limit ₹20 Lakhs, unless amended/adopted by their Board).
Is Gratuity taxable?
For Central/State Government employees, Gratuity received on retirement/death is 100% Tax-Free u/s 10(10)(i) of the Income Tax Act.
🇮🇳 हिंदी में सारांश (Summary in Hindi)
ग्रेच्युटी लिमिट अब ₹25 लाख
रिटायरमेंट और डेथ ग्रेच्युटी (Death Gratuity) की अधिकतम सीमा अब बढ़ाकर 25 लाख रुपये कर दी गई है। यह 1 जनवरी 2024 से लागू है।
- ✅ टैक्स फ्री (Tax Benefit): सरकारी कर्मचारियों को मिलने वाली ग्रेच्युटी पूरी तरह Tax-Free होती है।
- 📝 नॉमिनेशन (Nomination): अपनी सर्विस बुक में “Nomination Form” जरूर चेक करें। अगर नॉमिनेशन नहीं है, तो परिवार को क्लेम लेने में बहुत परेशानी होगी।
- ❌ बैंक/PSU कर्मचारी: यह 25 लाख की लिमिट केवल सेंट्रल गवर्नमेंट के लिए है। बैंक और प्राइवेट कर्मचारियों के लिए अभी भी नियम अलग हो सकते हैं।
Verified By: Pension Rules Analyst
Context: 7th CPC Revised Limit
✓ Updated Jan 2026