New Gratuity Rules : The government has introduced new gratuity rules that could help employees earning ₹35,000 per month secure a gratuity payout of up to ₹1.41 lakh. If you’re working in a private or government job, this could be an important financial benefit you don’t want to miss.

What Is Gratuity?

Gratuity is a lump sum payment made by an employer to an employee as a reward for long-term service. It acts as a financial cushion during retirement or when switching jobs. The recent changes in rules make gratuity more accessible and more rewarding.

Who Is Eligible?

To be eligible for gratuity:

• You must have completed at least 5 years of continuous service with the same employer.
• Breaks in service (due to leave or holidays) must be within the rules.
• Full-time, part-time, and even contractual workers may be eligible, depending on the terms of their contract.
• Some industries may have special provisions under collective agreements or union rules.

Gratuity Calculation Formula

Gratuity is calculated using this formula:

Gratuity = (Last drawn salary × 15 × years of service) ÷ 26

Let’s break it down with an example:

• Salary: ₹35,000 (basic + dearness allowance)
• Years of service: 10

So, Gratuity = (35,000 × 15 × 10) ÷ 26 = ₹2,01,923, but depending on caps or company limits, you may receive around ₹1.41 lakh.

Key Factors That Affect Gratuity

Factor	Impact
Last Drawn Salary	Higher salary = higher gratuity
Years of Service	Longer service = more payout
Company Policies	Some firms offer enhanced benefits
Industry Rules	Special norms for sectors like IT, banking, etc.
Tax Rules	Tax exemption up to ₹20 lakh

What About Taxes?

• Up to ₹20 lakh in gratuity is tax-free.
• Any amount beyond this is added to your taxable income.
• You can also invest gratuity in tax-saving instruments like PPF, NPS, or retirement funds.

Old vs. New Rules: What’s Changed?

Feature	Old Rules	New Rules
Tax-free Limit	₹10 lakh	₹20 lakh
Salary Component	Basic only	Basic + DA
Industry Flexibility	Limited	More industry-specific rules

How to Maximize Your Gratuity

To get the most out of your gratuity:

• Track your years of service and employment status.
• Check your salary slip regularly to ensure correct salary components.
• Engage with HR to understand your company’s gratuity policy.
• Plan ahead by consulting financial advisors.