Retirement or separation from work grants the benefits of gratuity to Indian employees. The rules and regulations of gratuity have undergone some important changes in April 2025 that employees need to learn about. Whether you are in the private sector or do a government job, these new rules directly affect your gratuity amount. Let us know in detail the latest changes in gratuity rules and their effects.
What Is Gratuity And Why Is It Important?
Gratuity is a statutory benefit given under the Payment of Gratuity Act, 1972. It is given to employees who have worked continuously for 5 years or more in an institution. It is calculated based on the last salary drawn by the employee and the years of service. The maximum limit of gratuity till April 2025 was Rs 20 lakh, which has now been changed.
Major Changes In April 2025
The two major changes that the central government has made in the gratuity rules during April 2025 are- the first raising the maximum limit of gratuity from Rs 20 lakh to Rs 25 lakh, the second important change is that now employees who have completed 4 years and 8 months of service shall also be entitled to a gratuity, provided the actually rounded service period would make it rounded up to 5 years. Keeping in mind the inflation rate and the employees’ interests, these changes have been made.
How Much Will The Gratuity Amount Increase With The New Rules?
The formula of gratuity calculation (last salary x years of service x 15/26) would remain as it is, while senior employees would be benefitted from the increased maximum limit. For instance, if a person’s last salary is Rs 1 lakh per month and he has served for 20 years, he will become entitled to 25 lakh rupees instead of 20 earlier. Especially beneficial for senior staff with higher salaries.
Which Employees Will Be Subject To The New Rules?
These rules shall be applicable for all organizations wherein 10 or more employees are employed. Even the government employees would be entitled to these rules. However, employees who work in companies that have not registered under the Gratuity Act would not benefit from this. The new rules would be considered applicable from April 1, 2025, and only employees who retire or leave the job after this date would be entitled to the new benefits.
New Process For Claiming Gratuity
The process has also changed for claiming gratuity, and that too simplified, with effect from April 2025. Employees need to now register their gratuity claims on the online portal. It is now mandatory under the new rules for employers to pay gratuity within 30 days, failing which they will be liable to pay interest on delay. Besides that, the timeline for lodging a complaint in case there is a dispute has also been enhanced to 3 years.
Conclusion
It is a positive step for Indian employees that these changes their gratuity rules will take effect from April-2025. Millions of employees will benefit from the increasing limit and relaxations in service periods. Employees should ensure that their employers comply with the Gratuity Act and all its rules, as these changes will boost the financial security cover of employees and help them secure financial life after retirement.
Also Read: Fitment Factor Hike: Big News For Government Employees, See Details
