Gratuity Rules: The central government has clarified the rules regarding gratuity under the NPS. The double gratuity limit and exemptions have been clarified for PSU, state government, and civil service employees who have completed military service. Learn the details.
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Gratuity Rules: The Central Government’s Department of Pension and Pensioners’ Welfare has issued an important Office Memorandum (OM) regarding gratuity for employees covered under the National Pension System (NPS). It clarifies the circumstances under which gratuity will be capped and those under which it will not apply, thus alleviating confusion for employees and pensioners.
What Rule 4A says about gratuity?
According to the Office Memorandum, Rule 4A of the CCS (Payment of Gratuity under NPS) Amendment Rules, 2025, provides that if a government employee has served in both the Central Government and a Public Sector Undertaking (PSU) or an autonomous body and receives gratuity separately from each, a limit will apply to the total gratuity.
Rules for Re-Employment in Government Service
If an employee is re-employed in government service after retirement, compulsory retirement, or receiving compassionate gratuity, they will generally not receive a separate gratuity for the period of re-employment. The Ministry’s OM clarifies that an employee who has already received gratuity will not be entitled to a new gratuity for the period of re-employment.
What will happen if you move from a PSU to the Central Government?
Employees who join the Central Government service with the appropriate permission from a PSU or autonomous body will receive gratuity for their government service. The gratuity received from the PSU/Autonomous Body will also remain.
However, the total gratuity from both places cannot exceed the amount that would have been due to the employee based on their total service period (PSU + Government) and their government retirement salary.
Case for both State and Central Services
The department also cited previous instructions dated February 12, 2020. According to this, if an employee has served first in a State Government and then in the Central Government and has received separate gratuities from both places, the limit will apply to the total gratuity.
This limit cannot exceed the gratuity that the employee would have received if they had retired on the same last pay while continuously serving the Central Government.
Major Relief for Civil Service Entrants After Military Service
The most important part of this Office Memorandum relates to employees who served in the military and later joined the civil service.
After consultation with the Department of Expenditure, the government has clarified that if an individual has already received military service gratuity, no additional limit will apply to the gratuity received during civil service. This means that there will be no reduction in civil service gratuity due to military gratuity.
Gratuity Rules Simplified and Transparent
This new clarity from the government has brought relief to thousands of employees and pensioners covered under the NPS. The rules have become clearer, especially for those who transitioned from PSUs to the government and those who joined the civil service after military service. This circular has made the provisions related to gratuity simpler, clearer, and more transparent than before.
