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7th Pay Commission: Based on the recommendations of the 7th Pay Commission, the limit of retirement gratuity and death gratuity under Central Civil Services (Pension) 2021 has been increased by 25 per cent.

Central Government Employees Gratuity: The Dearness Allowance given to Central Government Employees has crossed 50per centt. Due to this increase in dearness allowance, the gratuity received by central employees on retirement from January 1, 20,24 has become Rs 25 lakh, which was earlier Rs 20 lakh. Central employees do not have to pay any tax on gratuity of Rs 25 lakh received on retirement. It is completely tax-free. However, the tax-free gratuity limit for employees working in the private sector is only Rs 20 lakh.

Gratuity has become Rs 25 l.akh

The Department of Pension and Pensioners Welfare, under the Ministry of Personnel, Public Grievances and Pensions, has issued an office memorandum, increasing the maximum limit of gratuity after the recommendations of the 7th Pay Commission after the dearness allowance of central government employees reached per cent. In this order, it was told that based on the government’s decision to implement the recommendations of the Seventh Pay Commission, the maximum limit of retirement gratuity and death gratuity under the Central Civil Services (Pension) 2021 has been increased per cent and it has been increased from Rs 20 lakh to Rs 25 lakh, which has come into effect from January 1, 2024.

What is gratuity?

Gratuity is the amount given to the employee as a mark of respect for the services rendered by him to his employer. This amount is given to the employee instead of his long-term services in his organization on his retirement or on leaving the company after a period i.e. 5 years. Gratuity is a component of the gross salary of any employee but it is not given regularly. Rather, a lump sum payment is made when the employee leaves the company.

This is how gratuity is calculated!

Gratuity is calculated based on the salary received by the employee every month. To get a gratuity, any employee must serve continuously for at least 5 years. However, this rule does not apply if the employee dies or becomes disabled. To calculate gratuity for 5 years, 240 days in a year are counted as working days. Gratuity is given when any employee retires from service, is eligible for retirement, resigns after serving the same company continuously for 5 years, dies of an employee or becomes disabled due to illness or accident.

Demand for change in gratuity calculation rules

Recently, representatives of trade unions have demanded changes in the gratuity calculation rules in the pre-budget meeting with Finance Minister Nirmala Sitharaman so that employees can get more gratuity on retirement. These organizations have demanded that the Finance Minister increase the gratuity payment calculation from 15 days’ salary in a year to one month’s salary so that employees can get more gratuity on retirement.