Gratuity refers to a lumpsum amount paid by employers to employees in return for the services offered to company. It is paid according to norms under the Payment of Gratuity Act, 1972.

Gratuity is only given to employees who have completed at least five years of service in an organization. An employee can get gratuity before completing five years of service if he or she is disabled in an accident or due to illness. It mainly depends on your last drawn salary and the years of service you have provided to a company.

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An employee gets gratuity upon retirement, resignation from the company, demise, disablement due to an accident or disease, as part of a voluntary retirement scheme or VRS, termination, or lay off.

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The Department of Pension and Pensioners’ Welfare under the Ministry of Personnel, Public Grievances and Pensions have recently notified the Central Civil Services (Payment of Gratuity under National Pension System) Rules, 2021 for central government employees including civilian government employees in the Defence Services, who were appointed on or after January 1, 2004.

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Key takeaways from new rules
regarding gratuity of central government employees:

1. Any
claim to gratuity shall be regulated by the provisions of these rules in force
at the time when a Government employee retires or is retired or is discharged
or is allowed to resign from service or dies, as the case may be.

2. The
day on which a government servant retires or is retired or is discharged or is
allowed to resign from service, as the case may be, shall be treated as his
last working day and the date of death of a Government servant shall also be
treated as a working day.

3. Emoluments
to determine the amount of gratuity payable under these rules will include the
basic pay which a Government employee was receiving immediately before his
retirement or on the date of his death and shall also include non-practicing
allowance granted to the medical officer in lieu of private practice

4. Average
emoluments shall be determined with reference to the emoluments drawn by a
Government employee during the last ten months of his service. The dearness
allowance admissible on the date of retirement or death, as the case may be,
will also be treated as emoluments for the purpose of this rule.

5. The
retirement gratuity or death gratuity for the government employee who has
completed five years’ qualifying service will be equal to 1/4th of the
employee’s emoluments for each completed 6 monthly periods of qualifying
service, subject to a maximum of 16½ times the emoluments. 

6. In
the case of death, the gratuity payable will be paid to the person or persons
on whom the right to receive the gratuity is conferred by means of a
nomination.

7. The
amount of retirement gratuity or death gratuity payable under this rule shall
in no case exceed Rs 20 lakh.

8. In
all cases where the payment of gratuity has been authorized later than the date
when its payment becomes due, including the cases of retirement otherwise than
on superannuation, and it is clearly established that the delay in payment was
attributable to administrative reasons or lapses, interest shall be paid at the
rate and manner applicable to Public Provident Fund amount following the
instructions issued from time to time.