The Department of Pension and Pensioners’ Welfare (DoPPW) last year announced a 25% increase in the gratuity limit payable on retirement for central government employees after the dearness allowance (DA) was hiked to 50%. Post DA hike, the gratuity limit was enhanced from Rs 20 lakh to Rs 25 lakh for government employees, effective January 1, 2024.

A notification was issued on May 30 last year enhancing the gratuity limit for central government employees to Rs 25 lakh. As per norms, all allowances get revised upwards by 25% on DA reaching 50% of the basic pay for central government employees.

Will government employees get a gratuity benefit under UPS?

The Centre is going to roll out a new pension plan, ‘Unified Pension Scheme (UPS)’, from April 1, 2025. The UPS, which guarantees a minimum pension of Rs 10,000 for those government employees who serve for at least 10 years and a fixed pension for those who complete their entire service tenure, blends features of the Old Pension Scheme and the National Pension System (NPS).

In Parliament recently, the government was asked if the gratuity is admissible under the Unified Pension Scheme, as in the case of the Old Pension Scheme (OPS) and the New Pension Scheme (NPS).

Also read: Central govt employees to get 3 DA installments frozen during pandemic?

In its reply, the finance ministry said that the UPS being an option under NPS, “gratuity is payable in terms of Central Civil Services (Payment of Gratuity under National Pension System) Rules, 2021…”

One question was asked about the eligibility of employees for an assured payout in case of voluntary retirement from the service.

Rajya Sabha MP Javel Ali Khan asked whether, as per the Gazette Notification of the Ministry dated 24th January, 2025, under UPS, in cases of voluntary retirement after a minimum 25 years of qualifying service, assured payout will be commenced from the date on which the employee would have superannuated, if he had continued in service.

Responding to this, Minister of State for Finance Pankaj Chaudhary said that UPS, being a fund-based Pension System, relies on the regular and timely accumulation and investment of applicable contribution from both the employee and employer for assured payouts to the employees.

“Accordingly, keeping in view the growth of the fund over the actual length of the service, date for commencement of assured payouts in case of Voluntary Retirement will be from the date such employee would have superannuated, if the service period had continued to superannuation.”

Also read: Lowest DA hike in 7 years? Here’s how much central employees and pensioners may get

Will all government employees get Rs 25 lakh gratuity under UPS?

Last year, the government increased the maximum limit of gratuity for central employees to Rs 25 lakh, but this does not mean that every government employee will get this full amount.

Gratuity is calculated based on a special formula. According to the rule, an employee’s gratuity will be given 16.5 times his last salary (basic pay + dearness allowance) or Rs 25 lakh, whichever is less. This means that not every employee will get Rs 25 lakh, but gratuity will be decided according to their service period and salary.

How much gratuity will be available?

Government employees get two types of gratuity – retirement gratuity and death gratuity.

Retirement Gratuity:

One-fourth of your basic pay + dearness allowance is added for every 6 months of service.

Maximum 16.5 times salary or Rs 25 lakh, whichever is less, will be paid.

Minimum 5 years of service is required to get gratuity.

Death Gratuity:

If the employee dies during service, his family gets gratuity following this formula:

If less than 1 year of service, gratuity will be 2 times salary, if 1 to 5 years, 6 times salary, 5 to 11 years, 12 times salary, 11 to 20 years, 20 times salary, more than 20 years, and half salary every 6 months.