Gratuity Rule Update : Understanding your retirement benefits is crucial, and one of the most significant among them is the gratuity amount. If you’re earning ₹35,000 per month, you might be eligible to receive up to ₹1.41 lakh as a gratuity under the new rules. This article breaks down how the amount is calculated, what the eligibility criteria are, and how the latest changes in gratuity norms could benefit salaried employees like you.
Let’s explore the new gratuity rule, the exact formula, and how much you could receive based on your monthly salary.
What Is Gratuity and Why It Matters?
Gratuity is a financial benefit paid by an employer to an employee for long-term service. It is governed by the Payment of Gratuity Act, 1972.
- Gratuity is paid at the time of retirement, resignation, or in case of death/disability.
- It is applicable to employees who have completed at least 5 years of continuous service.
- The amount is a token of appreciation for the employee’s contribution to the organization.
Who Is Eligible for Gratuity?
Gratuity isn’t for everyone. Specific eligibility conditions must be met.
- You must be a salaried employee (private or government sector).
- Your organization should have 10 or more employees.
- You must have completed a minimum of 5 years of continuous service.
- In case of death or permanent disability, the 5-year rule is waived.
How Gratuity Is Calculated as Per New Rules
The formula to calculate gratuity is:
Gratuity = (Last Drawn Basic Salary × 15 × Years of Service) ÷ 26
Here’s how it works for a ₹35,000 monthly salary (basic + DA):
Gratuity Calculation Table (For ₹35,000 Salary)
| Years of Service | Monthly Salary (Basic + DA) | Calculation | Gratuity Amount (Approx) |
|---|---|---|---|
| 5 Years | ₹35,000 | (35,000 × 15 × 5) ÷ 26 | ₹1,01,000 |
| 6 Years | ₹35,000 | (35,000 × 15 × 6) ÷ 26 | ₹1,21,153 |
| 7 Years | ₹35,000 | (35,000 × 15 × 7) ÷ 26 | ₹1,41,346 |
| 8 Years | ₹35,000 | (35,000 × 15 × 8) ÷ 26 | ₹1,61,538 |
| 9 Years | ₹35,000 | (35,000 × 15 × 9) ÷ 26 | ₹1,81,730 |
| 10 Years | ₹35,000 | (35,000 × 15 × 10) ÷ 26 | ₹2,01,923 |
| 11 Years | ₹35,000 | (35,000 × 15 × 11) ÷ 26 | ₹2,22,115 |
| 12 Years | ₹35,000 | (35,000 × 15 × 12) ÷ 26 | ₹2,42,307 |
New Gratuity Rules You Should Know in 2025
Recent changes have made gratuity more inclusive and beneficial.
- No Capping for Gratuity Ceiling: Previously capped at ₹20 lakh, government may now revise limits based on inflation.
- Fixed-Term Employees Eligible: Contract employees can now receive gratuity after 1 year of service.
- Tax-Free Limit May Be Increased: Budget discussions may raise tax-free gratuity from ₹20 lakh to a higher amount.
- Gratuity for Gig Workers: There is discussion of extending benefits to platform workers and freelancers under labor codes.
Key Highlights of New Rules
| Feature | Old Rule | New Rule (2025 Update) |
|---|---|---|
| Eligibility Tenure | 5 Years | 1 Year for Contract Workers |
| Tax-Free Limit | ₹20 Lakh | May Be Increased |
| Fixed-Term Employee | Not Eligible | Eligible After 1 Year |
| Gig Workers | Not Included | Likely to Be Included |
| Maximum Gratuity Ceiling | ₹20 Lakh | Likely to Increase Based on Tenure |
How to Check Your Gratuity Amount Online
There are many online gratuity calculators available. Here’s how to use one:
- Visit any trusted gratuity calculator website.
- Enter your last drawn salary (basic + DA).
- Enter your total years of service.
- Click on calculate – you’ll see your approximate gratuity.
Note: Always verify with your HR department for accurate figures.
Gratuity Tax Benefits in 2025
Gratuity is tax-free up to a limit, but the latest updates may increase your benefits.
Current Tax Rules
- Government employees: Entire gratuity is tax-free.
- Private sector (covered under Gratuity Act): Tax-free up to ₹20 lakh.
- Excess over ₹20 lakh is taxed as per your income tax slab.
Possible 2025 Tax Reforms
- Government is considering increasing the tax-free ceiling.
- Tax exemptions may be expanded for small company employees.
- More clarity expected in upcoming Finance Bill.
What to Do If You Resign Before 5 Years?
If you resign before completing 5 years, you may not get gratuity—unless:
- You’ve completed 4 years and 240 days (legally accepted as 5 years).
- Your company policy is more lenient than the Act.
- You worked in a seasonal or contractual role with relaxed rules.
How Gratuity Benefits Long-Term Financial Planning
Gratuity is not just a retirement perk—it’s a powerful financial tool.
- Helps create a retirement corpus.
- Useful in purchasing a home or clearing debt.
- Acts as a backup in case of emergencies.
- Encourages long-term association with one company.
If your monthly salary is ₹35,000 and you’ve served 5 or more years, you could be eligible for gratuity up to ₹1.41 lakh or more, depending on your service tenure. With new rules in 2025 making gratuity easier to access—even for contractual and gig workers—every salaried individual should be aware of their rights. Use the formula or online calculators, plan accordingly, and stay updated on upcoming tax benefits and legal changes.
The gratuity amount and tax rules mentioned above are based on available data and updates as of 2025. Actual figures may vary based on salary structure, tenure, and company policy. Always consult your HR or financial advisor before making any retirement decisions.
Frequently Asked Questions (FAQs)
1. Is gratuity available if I resign before 5 years of service?
Generally no, but if you’ve worked for 4 years and 240 days, it may count as 5 years legally.
2. How do I calculate my gratuity manually?
Use this formula: (Last Drawn Salary × 15 × Years of Service) ÷ 26.
3. Is gratuity taxable in 2025?
Gratuity up to ₹20 lakh is tax-free; however, new changes may increase this limit.
4. Are contractual employees eligible for gratuity?
Yes, under the 2025 rule changes, fixed-term employees may get gratuity after 1 year.
5. Can gratuity be part of my CTC?
Yes, many companies include projected gratuity in the total Cost-to-Company (CTC) structure.