Gratuity under the NPS Rules, 2021

The Central Civil Services (Payment of Gratuity under National Pension System) Rules, 2021 grant a central government employee under the National Pension System three gratuities: the retirement gratuity, the death gratuity and the residuary gratuity, on the terms that apply to a pension-drawing employee under the CCS (Pension) Rules. They were notified as G.S.R. 658(E) on 23 September 2021 under the proviso to Article 309 and clause (5) of Article 148 of the Constitution, on file F. No. 59/03/2019-P&PW(B), and they were last amended by G.S.R. 258(E) dated 24 April 2025.

The gratuity these Rules carry is paid by the government and does not touch the National Pension System corpus. An employee under the National Pension System builds a corpus from contributions, withdraws a lump sum from it at exit and buys an annuity with the balance. The gratuity is none of that. It is computed on length of service and on emoluments, exactly as for an Old Pension Scheme employee, and it is paid over and above whatever the corpus yields, with no additional contribution from the employee.

The retirement gratuity is one-fourth of emoluments for each completed six-monthly period of qualifying service, subject to a maximum of 16.5 times emoluments and to a rupee ceiling of Rs. 25 lakh from 1 January 2024. The death gratuity runs from twice emoluments below one year of service to 33 times emoluments at 20 years and above. Emoluments are basic pay plus the dearness allowance admissible on the date of retirement or death, which is 60% of basic pay from 1 January 2026.

This article sets out who the Rules cover and who they leave out, the orders that preceded them, each of the three gratuities and the emoluments and qualifying service they are computed on, worked examples, the separation from the corpus, nomination and the order of payment, the effect of resignation, dismissal and compulsory retirement, the missing-employee procedure, the sanction timeline and interest on delay, the 2025 amendment, the Unified Pension Scheme position, the tax treatment, and how the ceiling moves.

Coverage, and the employees these rules leave out

Rule 2 applies these Rules to government servants, including civilian government servants in the Defence Services, appointed substantively to civil services and posts in connection with the affairs of the Union on or after 1 January 2004, and to whom the Central Civil Services (Implementation of National Pension System) Rules, 2021 apply. That date is the same boundary the National Pension System itself runs on, so the two sets of rules cover the same cohort.

Four groups sit outside. Railway servants are covered by the Railway Services (Payment of Gratuity under National Pension System) Rules, 2025, circulated as RBE No. 121/2025, which mirror these Rules for the railways rather than extending them. Armed forces personnel are governed by the defence pension regulations. State Government employees are governed by their own state rules. Employees of public sector undertakings, public sector banks, port trusts, the Reserve Bank of India, autonomous bodies, universities and societies fall under their own service rules or under the Payment of Gratuity Act, 1972, and the Rs. 25 lakh ceiling described below does not reach them.

The proviso to Rule 2 carves out one further case. Where an employee dies in service, is boarded out on disablement or retires on invalidation, and had exercised the option under Rule 10 of the CCS (Implementation of National Pension System) Rules, 2021 for benefits under the pension rules, the gratuity is paid under those rules and not under these. The Amendment Rules of 24 April 2025 updated the proviso to name the CCS (Pension) Rules, 2021 and the CCS (Extraordinary Pension) Rules, 2023 in place of the superseded 1972 and 1939 rules.

Orders that preceded the 2021 rules

The entitlement was built in two stages before it became statutory. Department of Pension and Pensioners’ Welfare Office Memorandum No. 38/41/2006-P&PW(A) dated 5 May 2009 came first, and it was narrow: it extended the retirement gratuity and the death gratuity, along with an invalid pension and a family pension, to National Pension System employees only where the employee died in service or was discharged on invalidation, and it did so on a provisional basis. An ordinary retirement carried nothing.

Office Memorandum No. 7/5/2012-P&PW(F)/B dated 26 August 2016 was the decisive order. It extended the retirement gratuity and the death gratuity to all National Pension System central government employees on the same terms and conditions as applied to employees covered by the CCS (Pension) Rules, 1972, replacing the provisional 2009 arrangement with a full entitlement.

The Central Civil Services (Payment of Gratuity under National Pension System) Rules, 2021, notified as G.S.R. 658(E) on 23 September 2021, then converted that administrative entitlement into subordinate legislation with its own 60-odd rules, its own forms and its own definitions. The practical difference is enforceability and detail: an Office Memorandum states the entitlement, while the Rules set out the qualifying-service conditions, the nomination machinery, the order of payment among family members, the missing-employee procedure and the interest liability.

Retirement gratuity

Retirement gratuity under Rule 22(1) is one-fourth of emoluments for each completed six-monthly period of qualifying service, subject to a maximum of 16.5 times emoluments, payable to an employee who has completed five years of qualifying service. The 16.5 times maximum is reached at 33 years of service, because 66 six-monthly periods multiplied by one-fourth is 16.5. The second proviso to Rule 22(2) rounds a fraction of a rupee in the final figure up to the next higher rupee.

Rule 22(1) grants it on four events, and only on those four. The first is retirement on attaining the age of superannuation, or on invalidation. The second is retirement in advance of superannuation under Rule 56 of the Fundamental Rules, 1922 or Rule 12 of the CCS (Implementation of National Pension System) Rules, 2021, which covers voluntary retirement and retirement in the public interest. The third is opting for the Special Voluntary Retirement Scheme on being declared surplus. The fourth is permitted absorption in a corporation or company wholly or substantially owned or controlled by the Central Government or a State Government, or in a body controlled or financed by either.

Rules 27 to 30 name the same benefit by the event that triggers it, all of them computed under Rule 22. A superannuation gratuity under Rule 27 is granted on attaining the age of superannuation, or on the expiry of an extension of service beyond it. An invalid gratuity under Rule 28 is granted on retirement for a bodily or mental infirmity that permanently incapacitates the employee, under Rule 16 of the Implementation Rules, where the option or default option is for National Pension System benefits. A retiring gratuity under Rule 29 covers the surplus-employee route. Gratuity on compulsory retirement under Rule 30 is dealt with below.

An employee who retires with less than five years of qualifying service receives no retirement gratuity, in the same way an Old Pension Scheme employee would not. The service gratuity that Rule 44(2) of the CCS (Pension) Rules, 2021 pays for service below 10 years has no counterpart in these Rules, because it is a substitute for a pension and the National Pension System pays no defined pension to substitute for.

Death gratuity

Death gratuity under Rule 22(2) is payable to the family where an employee dies while in service, with no minimum-service condition, on a slab scale fixed by length of qualifying service. It replaces the retirement gratuity rather than adding to it, and the same emoluments base and the same Rs. 25 lakh ceiling apply.

These are the slabs of the death gratuity under Rule 45 of the CCS (Pension) Rules, 2021, reproduced without change, so the family of a National Pension System employee who dies in service receives what the family of an Old Pension Scheme employee receives. The scale matters most for an early death, where a single year of service moves the multiple from two times to six times emoluments.

Explanation (2) to Rule 22 settles a question that recurs in death cases: death gratuity is admissible where the government servant commits suicide. Explanation (1) settles the counting: a fraction of a year equal to three months and above is treated as a completed half-year, so service rounds up from three months rather than down.

Residuary gratuity

Residuary gratuity under Rule 22(4) is the top-up paid where an employee who had become eligible for retirement gratuity dies within five years of retirement, including compulsory retirement as a penalty, and the sums received by the date of death fall short of 12 times emoluments. The deficiency is granted to the family in the manner set out in Rule 24(1). The Amendment Rules of 24 April 2025 substituted Rule 3(1)(h) to make the definition of gratuity in these Rules expressly include residuary gratuity.

The set-off is what distinguishes it from the pension-rules version. Rule 22(4) counts the retirement gratuity actually admissible and the sums actually received on account of the annuity under the National Pension System. Rule 45(3) of the CCS (Pension) Rules, 2021 counts the retirement gratuity, the commuted value of pension and the pension actually drawn. The floor of 12 times emoluments and the five-year window are identical; what is counted against the floor is not, because a National Pension System retiree draws an annuity rather than a pension and has no commuted value.

Residuary gratuity is nil for most full careers, because a retirement gratuity of 16.5 times emoluments already exceeds the 12 times floor on its own. It bites where service was short, and the residuary gratuity article works the arithmetic through in full.

Emoluments

Emoluments for gratuity under Rule 6(1) are the basic pay as defined in Rule 9(21)(a)(i) of the Fundamental Rules, 1922 drawn immediately before retirement or on the date of death, and include non-practising allowance granted to a medical officer in lieu of private practice. The Explanation to Rule 6(1) treats a stagnation increment as emoluments. The second proviso to Rule 22(3) adds the dearness allowance admissible on the date of retirement or death, which is 60% of basic pay from 1 January 2026 under Department of Expenditure Office Memorandum No. 1/1(i)/2026-E.II(B) dated 22 April 2026.

Five sub-rules deal with the awkward cases. Rule 6(2) uses the emoluments the employee would have drawn had there been no absence from duty, no leave on leave salary and no suspension followed by reinstatement without forfeiture, but excludes any increase in pay not actually drawn. Rule 6(3) allows the higher pay of an officiating or temporary appointment held before proceeding on leave only where it is certified that the appointment would have continued. Rule 6(4) uses the pay drawn immediately before extraordinary leave or suspension that does not count as service. Rule 6(5) counts an increment earned on earned leave though not actually drawn, provided it was earned within the first 120 days of that leave.

Rule 6(6) treats pay drawn on deputation to another central government department or to the armed forces as emoluments. Rule 6(7) excludes pay drawn on foreign service and substitutes the pay that would have been drawn under the government. Where emoluments were reduced during the last ten months of service otherwise than as a penalty, the first proviso to Rule 22(3) substitutes average emoluments under Rule 7, which is the more beneficial figure in a demotion case. The emoluments article sets out the parallel definition under the pension rules.

Qualifying service

Qualifying service is the service reckoned for gratuity under these Rules, and Rules 8 to 21 fix what counts. Service on probation counts under Rule 10 where it is followed by confirmation. Service as an apprentice does not count under Rule 11, except in the cases the rule saves. Rule 21 requires the Head of Office to verify qualifying service after 18 years of service and five years before retirement, which is the point at which gaps in the service book surface while they can still be cured.

Rule 12 counts all leave for which leave salary is payable and all extraordinary leave granted on a medical certificate. Extraordinary leave for any other reason counts only where the appointing authority allows it at the time of granting the leave, and only in two situations: inability to join or rejoin duty on account of civil commotion, and higher studies considered useful in the discharge of official duty. Rule 14 counts a period of suspension pending inquiry where the employee is fully exonerated, where only a minor penalty is imposed, or where the suspension is held wholly unjustified; otherwise it counts only to the extent the competent authority expressly declares.

Rule 20 counts service on foreign service in India or abroad, and on deputation to the United Nations or another international organisation, only where gratuity contributions have been deposited for that period, by the employee or by the foreign employer. Rules 18 and 19 govern interruptions and their condonation. The general counting rules are the same as those set out in the qualifying service article, and the three-month rounding in Explanation (1) to Rule 22 applies to the total.

Worked examples

Each example applies Rule 22 with dearness allowance at 60% of basic pay from 1 January 2026, so emoluments are basic pay multiplied by 1.6, and each is capped at Rs. 25 lakh.

• Retirement after 30 years, basic pay Rs. 80,000. Emoluments are Rs. 80,000 plus Rs. 48,000, which is Rs. 1,28,000. Thirty years is 60 completed six-monthly periods, so the retirement gratuity is 60 multiplied by one-fourth of Rs. 1,28,000, which is 60 multiplied by Rs. 32,000, or Rs. 19,20,000. That is within the ceiling and is paid in full.
• Retirement after 33 years, basic pay Rs. 1,00,000. Emoluments are Rs. 1,60,000 and the formula maximum of 16.5 times is Rs. 26,40,000, which exceeds the ceiling, so Rs. 25,00,000 is paid. Service beyond 33 years adds nothing, because the 16.5 times maximum is already reached.
• Retirement after 29 years and 5 months, basic pay Rs. 70,000. Emoluments are Rs. 1,12,000. Explanation (1) to Rule 22 treats the five-month fraction as a completed half-year, so 59 six-monthly periods count and not 58, giving 59 multiplied by Rs. 28,000, or Rs. 16,52,000. The rounding is worth Rs. 28,000.
• Death in service after eight years, basic pay Rs. 50,000. Emoluments are Rs. 80,000, and eight years falls in the five-years-to-under-eleven-years slab, so the death gratuity is 12 times Rs. 80,000, or Rs. 9,60,000, paid to the nominee under Rule 23 or to the family under Rule 24.
• Death three years after a 12-year career, basic pay Rs. 60,000 at retirement. Emoluments are Rs. 96,000 and the retirement gratuity was 24 multiplied by Rs. 24,000, or Rs. 5,76,000. Suppose the annuity paid Rs. 20,000 a month, so Rs. 7,20,000 was received over 36 months. The total of Rs. 12,96,000 exceeds 12 times emoluments of Rs. 11,52,000, so no residuary gratuity arises. Had death occurred at 24 months, the total would have been Rs. 10,56,000 and the residuary gratuity Rs. 96,000.

Separation from the NPS corpus

The gratuity under these Rules is a government liability discharged from the government’s own account, and it does not draw on the National Pension System corpus at any point. The corpus is built from the employee’s and the government’s contributions, invested through the pension funds, and drawn at exit as a lump sum and an annuity under the NPS exit rules. Nothing in the 2021 Rules charges the gratuity to it.

A National Pension System employee at retirement therefore receives two distinct things: the corpus benefits, and the gratuity under Rule 22. Neither reduces the other, and the employee pays nothing extra for the second. That is the whole substance of the 2016 extension and the 2021 Rules: a defined-benefit payment added to a defined-contribution scheme, rather than a rearrangement of the corpus.

The one place the corpus enters the gratuity arithmetic is Rule 22(4). Residuary gratuity sets the annuity sums actually received against the 12 times emoluments floor, so a larger annuity reduces or extinguishes the residuary top-up. That is a set-off in the computation of a deficiency, not a charge on the corpus.

Nomination and the order of payment

Rule 23 requires a government servant to make a nomination in Form 2 on initial confirmation in a service or post, conferring on one or more persons the right to receive the retirement gratuity or death gratuity payable under Rule 22. Where the employee has a family, the nomination may name only members of that family; where there is no family, it may name any person, persons or body of individuals. Where more than one person is nominated, the nomination must specify each share so that the shares cover the entire amount, and the Head of Office verifies the nomination on receipt.

Rule 22(5) defines family in two tiers, and Rule 24(1)(b) pays in that order where no nomination subsists. The first tier is the spouse, including a judicially separated spouse, sons including stepsons and adopted sons, unmarried daughters, and widowed or divorced daughters. Only if no member of that tier survives does payment go to the second tier: father, mother, brothers below 18, unmarried and widowed sisters, married daughters, and the children of a pre-deceased son. Within each tier the shares are equal.

Three further provisions decide the hard cases. Rule 24(3) preserves the share of a female member who marries or remarries, and of a brother who attains 18, after the death and before payment. Rule 24(4) pays a minor’s share to the natural guardian, and in the absence of one, 20% of the share may be paid against an indemnity bond in Proforma A with the balance released on a guardianship certificate. Rule 25 suspends the share of a person charged with murdering or abetting the murder of the government servant until the criminal proceedings conclude, debars it on conviction and releases it on acquittal. Rule 26 lapses the gratuity to the government where the employee leaves no family and no subsisting nomination, subject to payment against a succession certificate granted by a court.

Resignation, dismissal and compulsory retirement

Resignation forfeits the gratuity. Rule 17(1) provides that resignation from a service or a post, unless it is allowed to be withdrawn in the public interest by the appointing authority, entails forfeiture of past service, and Rule 22(1) grants the retirement gratuity only on retirement. Department of Pension and Pensioners’ Welfare Office Memorandum No. 2/8/2025-P&PW(F)/11164 dated 24 October 2025 confirmed the position after repeated references, and named the two exceptions. Rule 17(2) saves a technical resignation submitted with proper permission to take up another government appointment where service qualifies. Rule 17(5) saves a resignation submitted for absorption under Rule 32, where the employee is deemed to have retired from the date of absorption and draws the gratuity on that date.

Dismissal and removal forfeit the gratuity outright under Rule 31, and Rule 15 forfeits the past service that would have produced it. The proviso to Rule 31 lets the authority competent to dismiss or remove sanction a compassionate gratuity of up to two-thirds of the retirement gratuity computed under Rule 22(1), where the case deserves special consideration. Rule 16 restores past service on reinstatement.

Compulsory retirement as a penalty is treated differently from dismissal. Rule 30(1) lets the authority imposing the penalty grant a gratuity at a rate not less than two-thirds of the gratuity admissible on the date of compulsory retirement, so the floor is two-thirds rather than nil. Rule 30(2) requires consultation with the Union Public Service Commission wherever the President passes an order granting less than the full gratuity admissible. Rule 5 separately reserves to the President the right to withhold gratuity in full or in part, and to order recovery of pecuniary loss caused to the government, where a retired employee is found guilty of grave misconduct or negligence in departmental or judicial proceedings instituted while in service, again after consulting the Union Public Service Commission. The withholding and recovery from gratuity article sets out that power in full.

Payment where a government servant is missing

Rule 33 gives the family of a missing government servant a route to the retirement gratuity without waiting seven years for a presumption of death. The family lodges a complaint with the police station concerned and obtains a report that the employee has not been traced despite all efforts, which may be the First Information Report or a Daily Diary or General Diary entry.

Six months after the complaint, the family applies in Form 4 to the Head of Office of the organisation where the employee last served. The ministry or department satisfies itself that the complaint and the non-traceable report are correct, and takes an indemnity bond in Proforma B from the nominee or dependants so that the gratuity can be adjusted against what is due if the employee reappears and makes a claim. The Head of Office processes the case in Form 5.

The retirement gratuity is paid within three months of the date of application, and interest at the Public Provident Fund rate runs on any delay, with responsibility fixed under Rule 44. The difference between the death gratuity and the retirement gratuity is paid once death is conclusively established, or on the expiry of seven years from the date of the police report, whichever comes first. Rule 33(5) requires all outstanding government dues to be assessed and recovered under Rule 45 before the gratuity is sanctioned.

Sanction, timeline and interest on delay

Rule 34 requires every Head of Office to begin preparing the gratuity papers in Form 6 one year before the date of superannuation, or before the date the employee proceeds on leave preparatory to retirement, whichever is earlier. Rules 35 to 43 carry the sequence from there: intimation to the Directorate of Estates, completion of Part I of Form 6, forwarding the forms to the Accounts Officer, intimation of government dues, provisional gratuity where the papers are incomplete for reasons other than departmental or judicial proceedings, and authorisation by the Accounts Officer. The same machinery and the same milestones as the pension sanction process and timeline apply.

Rules 45 to 47 govern recovery of government dues from the gratuity, including dues on government accommodation, before payment is released. On a death in service, Rule 48 requires the Head of Office to obtain the claim for death gratuity from the family, Rule 49 covers the completion of Form 10, and Rule 50 deals with a case where the service records are incomplete.

Rule 44 fixes the interest liability where payment is late. Interest at the rate applicable to Public Provident Fund deposits is payable in all cases where the gratuity is authorised later than the date payment becomes due, including retirement otherwise than on superannuation, and where it is clearly established that the delay was attributable to administrative reasons or lapses. The proviso excludes a delay caused by the employee failing to comply with the prescribed procedure for processing the papers. Explanation (1) sets the trigger at three months from the date of retirement on superannuation. The Secretary of the ministry or department sanctions the interest, the ministry issues a Presidential sanction, and Rule 44(4) requires responsibility to be fixed and disciplinary action taken against those responsible for the administrative lapse.

Amendment Rules, 2025

G.S.R. 258(E) dated 24 April 2025 made the only amendment to date, and it added five things. Rule 3(1)(h) was substituted so that gratuity includes retirement gratuity, death gratuity and residuary gratuity payable under these Rules, aligning the definition with what Rule 22(4) had granted since 2021. The proviso to Rule 2 was updated to name the CCS (Pension) Rules, 2021 and the CCS (Extraordinary Pension) Rules, 2023 in place of the 1972 and 1939 rules they replaced.

A new Rule 4A limits gratuity on re-employment. An employee who has received a retirement gratuity, including on compulsory retirement, cannot claim a separate gratuity for the period of re-employment. The exception is a person who moves from an autonomous body or a public sector undertaking into government service, who may receive a combined gratuity subject to the ceiling.

New Rules 9A and 9B count outside service. Rule 9A counts continuous service under a State Government that has similar gratuity provisions, where the employee moves to the Central Government, with the Central Government bearing the gratuity liability. Rule 9B counts service in an autonomous body on three conditions: the appointment is followed by a substantive posting, no gratuity has already been received for that service, and the body discharges its share of the liability. A new Rule 32A mirrors Rule 32 for absorption in a State Government, granting the retirement gratuity on the qualifying service and emoluments as on the date of absorption.

Option for benefits under the pension rules

Rule 10 of the CCS (Implementation of National Pension System) Rules, 2021 lets an employee covered by the National Pension System opt, in Form 1, for benefits under the CCS (Pension) Rules or the extraordinary-pension rules where death occurs in service or where the employee is boarded out on disablement or retires on invalidation. Where that option is exercised or applies by default, the proviso to Rule 2 of these Rules directs that the gratuity be paid under those rules and not under these.

The distinction is about which code governs, not about the amount. The retirement gratuity formula, the death gratuity slabs, the emoluments base and the Rs. 25 lakh ceiling are the same under both codes, because the 2021 Rules reproduce Rule 45 of the CCS (Pension) Rules, 2021. What changes is everything the option was actually made for: a family pension, an invalid pension, a disability pension or a constant attendant allowance under the extraordinary-pension rules, none of which the gratuity Rules carry.

Rule 28 makes the same split for invalid gratuity. Where the option or the default option is for National Pension System benefits, the invalid gratuity is granted under Rule 22. Where it is for the pension rules and Section 20 of the Rights of Persons with Disabilities Act, 2016 does not apply, the Head of Office disburses the benefits under those rules instead.

Unified Pension Scheme coverage

Subscribers to the Unified Pension Scheme, in force from 1 April 2025, draw the retirement gratuity and the death gratuity under these same 2021 Rules, with the same one-fourth per six-month formula, the same 16.5 times and 33 times maxima and the same Rs. 25 lakh ceiling. The Unified Pension Scheme operates as an option within the National Pension System, so its subscribers remain within Rule 2.

The Unified Pension Scheme adds a separate lump sum that is easily confused with the gratuity. Regulation 14 of the PFRDA (Operationalisation of the Unified Pension Scheme under the National Pension System) Regulations, 2025 pays one-tenth of emoluments for each completed six-month period of qualifying service, and Regulation 14(3) states expressly that it is in addition to the assured payout and does not affect its quantum. Unlike the assured payout, it is not capped at 300 months of service.

The two payments differ in rate, cap and source. The gratuity is one-fourth of emoluments per six-month period, capped at 16.5 times emoluments and at Rs. 25 lakh, and is paid under the 2021 Rules. The Regulation 14 lump sum is one-tenth of emoluments per six-month period, uncapped in service length, and is paid under the Unified Pension Scheme regulations. A retiring subscriber receives both, alongside the monthly assured payout and any surplus in the individual corpus. The NPS versus OPS versus UPS comparison sets the three schemes side by side.

Comparison with the pension rules and the Gratuity Act

Tax treatment

Gratuity received under these Rules by a central government employee is exempt from income tax in full, with no monetary limit. For income from 1 April 2026 the exemption is at serial number 3 of the Table in Section 19(1) of the Income-tax Act, 2025, and for earlier income at Section 10(10)(i) of the Income-tax Act, 1961. The exemption covers the retirement gratuity, the death gratuity and the residuary gratuity alike, and it does not turn on which pension scheme the employee was under.

Two figures are routinely conflated and are different things. Rs. 20 lakh is the cap on the tax exemption for a non-government employee under Section 10(10)(iii) of the Income-tax Act, 1961. Rs. 25 lakh is the ceiling on the amount payable under Rule 22 of these Rules. The Rs. 25 lakh figure is not a tax cap, and if a larger amount were payable the exemption on it would still be unlimited for a government employee.

The exemption is separate from the tax treatment of the corpus. The lump-sum withdrawal at exit and the annuity are taxed under the rules that govern the National Pension System tax benefits and the income tax for pensioners, and nothing in the gratuity exemption reaches them.

Ceiling of Rs. 25 lakh and its escalation

The first proviso to Rule 22(2) as notified caps the retirement gratuity and the death gratuity at Rs. 20 lakh. Department of Pension and Pensioners’ Welfare Office Memorandum No. 28/03/2024-P&PW(B)/Gratuity/9559 dated 30 May 2024 raised the cap to Rs. 25 lakh with effect from 1 January 2024, naming the CCS (Pension) Rules, 2021 and these Rules and no others, so the gazetted text still reads Rs. 20 lakh while the operative ceiling is Rs. 25 lakh.

The ceiling moves on dearness allowance, not on a pay commission. It rises by 25% each time the dearness allowance rate rises by 50%, under the government’s decisions on the 7th Central Pay Commission recommendations. Department of Expenditure Office Memorandum No. 1/1/2024-E-II(B) dated 12 March 2024 raised dearness allowance from 46% to 50% with effect from 1 January 2024, and that crossing triggered the step from Rs. 20 lakh to Rs. 25 lakh from the same date, with no separate decision needed. The path runs Rs. 10 lakh under the 6th Central Pay Commission, Rs. 20 lakh from 1 January 2016 under the 7th Central Pay Commission, Rs. 25 lakh from 1 January 2024, and Rs. 31.25 lakh when dearness allowance crosses 100%.

The 8th Central Pay Commission, constituted by Ministry of Finance Resolution F. No. 01-01/2025-E.III(A) dated 3 November 2025, will revise basic pay and so the emoluments every gratuity is computed on, and a pay revision resets the dearness allowance base from which the ceiling escalates. The gratuity rate, the maxima and these Rules themselves are not a matter for a pay commission. Until the Commission reports and any revision is notified, the gratuity runs on Rule 22, with the Rs. 25 lakh ceiling and dearness allowance at 60% from 1 January 2026. Any revised ceiling or formula attributed to the 8th Central Pay Commission is a projection.

Related Articles

• Gratuity for central government employees
• Death gratuity
• Service gratuity
• Residuary gratuity
• Withholding and recovery from gratuity
• National Pension System
• Unified Pension Scheme
• Old Pension Scheme
• NPS vs OPS vs UPS
• NPS exit rules
• NPS tax benefits
• CCS (Pension) Rules, 2021
• CCS (Extraordinary Pension) Rules, 2023
• Central government pension
• Central government pension calculation
• Pension sanction process and timeline
• Family pension
• Invalid pension
• Disability pension
• Constant attendant allowance
• Emoluments (for pension)
• Qualifying service
• Extraordinary leave
• Suspension
• Technical resignation
• Resignation from government service
• Compulsory retirement
• Voluntary retirement
• Fundamental Rules
• Dearness allowance
• Income tax for pensioners
• Income-tax Act, 2025
• Department of Pension and Pensioners’ Welfare
• PFRDA
• PPO and life certificate
• 7th Central Pay Commission
• 8th Central Pay Commission

External references

• Department of Pension and Pensioners’ Welfare
• Pension Fund Regulatory and Development Authority
• Pensioners’ Portal
• Central Pension Accounting Office
• Department of Expenditure
• Income Tax Department
• The Gazette of India

References

1. Central Civil Services (Payment of Gratuity under National Pension System) Rules, 2021, notified as G.S.R. 658(E) dated 23 September 2021 on F. No. 59/03/2019-P&PW(B): Rule 2 (application), Rule 6 (emoluments), Rules 8 to 21 (qualifying service), Rule 22 (retirement, death and residuary gratuity), Rule 23 (nominations in Form 2), Rules 24 to 26 (persons to whom payable, debarring, lapse), Rules 27 to 32 (superannuation, invalid, retiring and compulsory-retirement gratuity, dismissal, absorption), Rule 33 (missing government servant), Rules 34 to 43 (determination and authorisation), Rule 44 (interest on delayed payment) and Rules 45 to 47 (recovery of government dues).
2. Central Civil Services (Payment of Gratuity under National Pension System) Amendment Rules, 2025, notified as G.S.R. 258(E) dated 24 April 2025, substituting Rule 3(1)(h) and the proviso to Rule 2 and inserting Rules 4A, 9A, 9B and 32A.
3. Department of Pension and Pensioners’ Welfare Office Memorandum No. 38/41/2006-P&PW(A) dated 5 May 2009, provisionally extending the retirement and death gratuity to National Pension System employees in cases of death in service or discharge on invalidation.
4. Department of Pension and Pensioners’ Welfare Office Memorandum No. 7/5/2012-P&PW(F)/B dated 26 August 2016, extending the retirement gratuity and the death gratuity to all National Pension System central government employees on the same terms and conditions as applied under the CCS (Pension) Rules, 1972.
5. Department of Pension and Pensioners’ Welfare Office Memorandum No. 28/03/2024-P&PW(B)/Gratuity/9559 dated 30 May 2024, raising the maximum retirement gratuity and death gratuity from Rs. 20 lakh to Rs. 25 lakh with effect from 1 January 2024 under the CCS (Pension) Rules, 2021 and the CCS (Payment of Gratuity under National Pension System) Rules, 2021.
6. Department of Pension and Pensioners’ Welfare Office Memorandum No. 2/8/2025-P&PW(F)/11164 dated 24 October 2025, clarifying that no gratuity is payable on an ordinary resignation under the CCS (Payment of Gratuity under NPS) Rules, 2021, the exceptions being a technical resignation under Rule 17(2) and a deemed retirement on absorption under Rule 17(5) read with Rule 32.
7. Central Civil Services (Implementation of National Pension System) Rules, 2021, G.S.R. 227(E) dated 31 March 2021, Rule 10 (option in Form 1 for benefits under the pension rules), Rule 12 (retirement in advance of superannuation) and Rule 16 (retirement on invalidation).
8. Central Civil Services (Pension) Rules, 2021, Rule 44(2) (service gratuity) and Rule 45 (retirement gratuity, death gratuity and residuary gratuity), whose terms the 2021 NPS Rules reproduce.
9. Department of Expenditure Office Memorandum No. 1/1/2024-E-II(B) dated 12 March 2024, raising dearness allowance to 50% with effect from 1 January 2024, and Office Memorandum No. 1/1(i)/2026-E.II(B) dated 22 April 2026, fixing dearness allowance at 60% with effect from 1 January 2026.
10. PFRDA (Operationalisation of the Unified Pension Scheme under the National Pension System) Regulations, 2025, Regulation 14 (lump sum on superannuation, separate from and additional to the assured payout), with the Unified Pension Scheme in force from 1 April 2025.
11. Income-tax Act, 2025, Section 19(1) Table serial number 3 (death-cum-retirement gratuity, entire amount), in force for income from 1 April 2026, and Income-tax Act, 1961, Section 10(10)(i) and Section 10(10)(iii).
12. Ministry of Finance, Department of Expenditure, Resolution F. No. 01-01/2025-E.III(A) dated 3 November 2025, constituting the 8th Central Pay Commission.