The Dearness Allowance (DA) for Central Government employees has crossed 50%, resulting in an increase in gratuity for employees retiring on or after January 1, 2024.
The maximum gratuity amount has been raised to ₹25 lakh, up from ₹20 lakh.
Central Government employees receive this gratuity tax-free, while private sector employees have a tax-free gratuity limit of only ₹20 lakh.
Gratuity Limit Increased to ₹25 Lakh
The Department of Pension and Pensioners Welfare, under the Ministry of Personnel, Public Grievances, and Pensions, issued a memorandum confirming the increase in gratuity limits.
This change is based on the recommendations of the 7th Pay Commission after the DA reached 50%.
As per the revised Central Civil Services (Pension) 2021 rules, the retirement and death gratuity limits have been raised by 25%, effective from January 1, 2024.
What Is Gratuity?
Gratuity is a financial benefit given to employees as a token of appreciation for their service.
It is a one-time payment made when an employee retires, resigns after completing at least five years of continuous service, or in cases of death or disability.
Gratuity is part of an employee’s gross salary but is paid as a lump sum, not regularly.
Gratuity Calculation Explained
Gratuity is calculated based on the employee’s monthly salary and requires at least five years of continuous service, except in cases of death or disability.
For this purpose, 240 working days are counted as a year. Employees are eligible for gratuity upon:
1) Retirement from service
2) Voluntary resignation after five years of service
3) Death or disability due to illness or accident
Call for Changes in Gratuity Rules
During a recent pre-budget meeting with Finance Minister Nirmala Sitharaman, trade union representatives requested changes to the gratuity calculation method.
They proposed increasing the calculation from 15 days’ salary per year of service to one month’s salary to ensure higher gratuity payouts upon retirement.
This suggestion aims to further enhance financial security for employees in their post-retirement phase.
