Gratuity Rule Changed: The central government is going to launch a new pension scheme, ‘Unified Pension Scheme (UPS)’ from April 1, 2025. This scheme combines the features of Old Pension Scheme (OPS) and National Pension System (NPS).
Gratuity Rule Changed: Last year, the Department of Pension and Pensioners Welfare (DoPPW) increased the maximum limit of gratuity for central government employees by 25 per cent to Rs 25 lakh. This change came into effect from January 1, 2024, when dearness allowance (DA) reached 50 per cent. However, it is not necessary that every government employee gets this full amount.
How is gratuity calculated?
Gratuity is calculated on the basis of a special formula. According to the rule, the employee gets 16.5 times his last salary (basic pay + dearness allowance) or Rs 25 lakh, whichever is less, as gratuity. This means that every employee will not get Rs 25 lakh, but the gratuity will be decided based on their service period and salary.
Types of Gratuity
Government employees get two types of gratuity – retirement gratuity and death gratuity.
Retirement Gratuity
- One fourth of the basic pay + dearness allowance is added for every 6 months of service.
- A maximum of 16.5 times the salary or Rs 25 lakh, whichever is less, will be given.
- A minimum of 5 years of service is mandatory to get gratuity.
Death Gratuity
If the employee dies during service, his family will get gratuity according to this formula-
- Less than 1 year of service: 2 times the salary
- 1 to 5 years: 6 times the salary
- 5 to 11 years: 12 times the salary
- 11 to 20 years: 20 times the salary
- More than 20 years: Half salary for every 6 months
Will gratuity be available under Unified Pension Scheme (UPS)?
The central government is going to launch a new pension scheme, ‘Unified Pension Scheme (UPS)’ from April 1, 2025. This scheme combines the features of Old Pension Scheme (OPS) and National Pension System (NPS). In this, employees with at least 10 years of service will be guaranteed a minimum pension of Rs 10,000 and those who complete the entire service period will be guaranteed a fixed pension.
Recently, the government was asked in Parliament whether gratuity will be available under the Unified Pension Scheme (UPS), as is available under the Old Pension Scheme (OPS) and New Pension Scheme (NPS). The Finance Ministry replied that UPS is an option under NPS, and “gratuity will be paid as per the Central Civil Services (Payment of Gratuity under National Pension System) Rules, 2021.”
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