The central government has clarified that the benefit of the ₹25 lakh gratuity limit will only be available to civil servants covered under the Central Civil Services (Pension) Rules. Employees of banks, PSUs, RBI, universities, and state governments will remain outside the purview of this increased limit, which has dashed the hopes of millions of employees.
Gratuity Limit Hike: The central government has clarified the situation regarding the ₹25 lakh gratuity limit, stating that this benefit will only be extended to employees covered under the Central Civil Services (Pension) Rules, 2021, and the Central Civil Services (Payment of Gratuity under National Pension System) Rules, 2021. This rule will not apply to employees of banks, PSUs, RBI, universities, and state governments. The government issued this clarification to dispel the confusion that arose after the notification released on May 30, 2024.
Government had increased gratuity limit
On May 30, 2024, the central government issued a notification increasing the gratuity limit from ₹20 lakh to ₹25 lakh. This decision was also made effective from January 1, 2024. At that time, it was assumed that this relief would apply to all central government employees, as well as employees of public sector undertakings, banks, universities, and other government institutions. However, the government has now made it clear that this is not the case.
Ministry issues clarification
The Department of Pension & Pensioners' Welfare (DoPPW), under the Ministry of Personnel, Public Grievances and Pensions, has issued a new order clarifying the situation. The department stated that the increased gratuity limit will only be available to employees covered under the Central Civil Services (Pension) Rules, 2021, and the Central Civil Services (Payment of Gratuity under National Pension System) Rules, 2021. This means that only central government civil servants falling under the purview of these two sets of rules will be able to avail this increased benefit.
The government had to issue this clarification because, after the notification was released, various institutions and employees began querying the government through RTI requests and letters. Employees from banks, PSUs, RBI, universities, and state governments across the country wanted to know if this ₹25 lakh limit also applied to them.
Due to this confusion, the department started receiving a large number of inquiries. Ultimately, the Ministry deemed it necessary to respond officially to prevent any misunderstanding at any level.
Who will not receive the benefit of the increased limit
The government has clearly stated that employees of banks, Public Sector Undertakings (PSUs), the Reserve Bank of India (RBI), Port Trusts, autonomous bodies, universities, societies, and state governments will not receive this benefit.
The gratuity and pension-related rules for employees of all these institutions are different from the Central Government's Civil Services Rules. Therefore, the benefit of the increased limit cannot automatically apply to them. The department advised employees of these institutions to contact their respective ministries or administrations to get information according to their institution's rules.
Who is eligible for this benefit
The benefit of gratuity up to ₹25 lakh will only be available to those employees who are central government civil servants and who fall under the following two sets of rules:
Central Civil Services (Pension) Rules, 2021
Central Civil Services (Payment of Gratuity under National Pension System) Rules, 2021.
Employees covered under these rules will be eligible for gratuity up to ₹25 lakh at the time of retirement. This means the benefit will be limited to civil servants working in central government departments.
Hopes of millions of employees dashed
When the increase in the gratuity limit was announced, a wave of joy spread among millions of employees across the country. Employees of banks, PSUs, and state governments also thought that they would now receive higher gratuity upon retirement. However, with this new order from the Ministry, their hopes have been brought to a halt.
Many employee organizations argue that the government should have extended this benefit to all employees, given the rapid increase in inflation and the cost of living. However, the Ministry has not commented on this.
What is Gratuity and Why is it Important
Gratuity is an amount paid to an employee upon retirement from service or completion of service. It is a form of financial honor and security provided by the employer in exchange for long-term service. Gratuity is paid under the Payment of Gratuity Act, 1972.
The limit for the gratuity amount has been increased from time to time to provide relief to employees commensurate with their last drawn salary. Previously, this limit was ₹10 lakh, which was increased to ₹20 lakh in 2018. The central government has now set it at ₹25 lakh, but for now, it will remain limited to civil servants.
