Central Government Employees Receive Welcome News: Gratuity Limit Rises to ₹25 Lakh
In a move offering significant financial relief, the central government has increased the maximum gratuity limit for its employees to ₹25 lakh. This decision, effective from January 1, 2024, marks a substantial 25% rise from the previous limit of ₹20 lakh.
The Department of Pension and Pensioners' Welfare (DoPPW), the nodal body for pension-related policies, issued an order clarifying that the enhanced gratuity limit applies exclusively to central government civil servants covered under the Central Civil Services (Pension) Rules, 2021, or the Central Civil Services (Payment of Gratuity under National Pension System) Rules, 2021.
Who Benefits from the Increased Gratuity?
The revised gratuity ceiling specifically benefits regular central government civil servants governed by the CCS (Pension) Rules, 2021, or the CCS (Payment of Gratuity under NPS) Rules, 2021. This clarification was deemed necessary by the DoPPW after receiving numerous inquiries and RTI applications seeking clarity on the applicability of the increased limit to other organizations.
Exclusions from the Revised Gratuity Limit
It's important to note that the enhanced gratuity limit does not extend to all government employees. Employees of public sector undertakings (PSUs), banks, port trusts, the Reserve Bank of India (RBI), autonomous institutions, universities, state governments, or societies are not eligible for the increased limit and will continue to be governed by their respective service or pension regulations.
The DoPPW has clarified that the rules pertaining to central government civil servants do not apply to these organizations, and any queries regarding the applicable rules should be directed to the concerned organization or their respective administrative ministry/department.
Basis for the Decision
The decision to raise the gratuity ceiling was initially announced through an Office Memorandum dated May 30, 2024. This order officially increased the maximum limit for retirement and death gratuity by 25%, aligning with the recommendations of the 7th Pay Commission. The revision was made after the Dearness Allowance (DA) for central government employees reached 50% of their basic pay. Existing norms dictate that all allowances are revised upwards by 25% when DA hits 50% of the basic pay.
Understanding Gratuity
Gratuity is a lump sum benefit paid to employees upon retirement or resignation, provided they have rendered a minimum of five years of qualifying service. Retirement gratuity is calculated as 1/4th of a month's basic pay plus dearness allowance (DA) drawn on the date of retirement for each completed six-month period of qualifying service. The retirement gratuity payable for qualifying service of 33 years or more is 16.5 times the basic pay plus DA, subject to the maximum limit.
In the unfortunate event of an employee's death during service, their family receives a death gratuity, a one-time lump sum benefit. The amount of death gratuity varies depending on the length of service.
DoPPW's Role
The DoPPW plays a crucial role in formulating and implementing policies related to pension and retirement benefits for central government employees. The department strives to streamline procedures to ensure accurate and timely payments to retirees and serving officials, in accordance with approved rules and regulations.
