To clear any confusion regarding the payment of gratuity to central government employees enrolled in the National Pension System (NPS), the Department of Pension and Pensioners’ Welfare (DoPPW) has issued a detailed Office Memorandum. The government has clarified the eligibility criteria for gratuity and death gratuity. This clarification was issued in response to numerous questions and RTI applications. Gratuity is a lump sum payment given to an employee to provide financial security upon retirement.
Calculation of Retirement Gratuity and Death Gratuity
Retirement Gratuity
This amount is given to a government employee upon retirement. A minimum of 5 years of service is required. It is calculated as $1/4 of a month’s Basic Pay + DA (Dearness Allowance) for every 6 months of service completed. There is no minimum limit for the gratuity amount. If someone has served for 33 years or more, they can receive gratuity up to 16.5 times their Basic Pay + DA, but the maximum limit is ₹25 lakh (Gratuity Fund).
Death Gratuity
This is a lump sum payment made to the family or nominee of an employee who dies while on duty. There is no minimum length of service required, meaning this benefit is available even after one day of service. The death gratuity formula (times) based on service length is as follows: 2 times the salary for less than 1 year of service. 6 times the salary for 1 to 5 years of service. 12 times the salary for 5 to 11 years of service. 20 times the salary for 11 to 20 years of service. And half a month’s salary is paid every 6 months for more than 20 years of service.
When will gratuity be received
The government has clarified that a central government employee will receive gratuity under the NPS only if they meet one of the following conditions:
- First, the employee is retiring on superannuation (that is, upon reaching retirement age). (On medical grounds) or retiring after being declared unfit for service on medical grounds.
- Second, gratuity is also available in case of retirement before the prescribed age. If an employee is prematurely retired under Rule 56 (Basic Rules 1922) or Rule 12 (NPS Rules 2021), he or she will still be eligible for gratuity.
- Third, gratuity is also paid upon abolition of a post. If a post in a department is abolished and the employee is declared surplus and opts for the Voluntary Retirement Scheme (VRS), he or she will still receive gratuity.
- Fourth, benefits are also available upon adjustment to another government service/post. If an employee is adjusted in a central/state government or government company, he or she will still receive gratuity. In this case, he or she will receive gratuity for every 6 months of service completed. One-fourth of the salary will be given as gratuity, up to a maximum of 16.5 times the salary.
When Gratuity Will Not Be Given
The government has specified the circumstances under Rule 17 (NPS Gratuity Rules 2021) when an employee’s past service will be considered forfeited and gratuity will not be accrued. This occurs when an employee submits a simple resignation and is not allowed to withdraw his/her resignation in the public interest. In this case, his/her entire past service will be forfeited, and gratuity will not be accrued.
However, there are two important circumstances where service is not forfeited: First, if an employee resigns to take up another government job with proper permission (Technical Resignation), his/her past service is not forfeited, and gratuity is retained. Second, service is not forfeited even if he/she resigns under Rule 32.
Rule 32 states that if a government employee resigns from a company, corporation, or institution, he/she is not allowed to withdraw his/her previous service. If a person joins an organization owned/controlled by the Central or State Government, he or she will be considered retired from government service.
In this situation, he or she will receive retirement gratuity. The bottom line is that a simple resignation terminates the employee’s previous service, while a technical resignation or adjustment to a government-controlled organization preserves the service and the employee remains entitled to gratuity.