Gratuity in India is a financial benefit awarded to employees as a token of appreciation for their long-term service. It not only recognizes their dedication but also contributes to their financial security. In 2025, the Indian government introduced key changes to the gratuity rules, enhancing transparency, accessibility, and employee protection. These reforms aim to make gratuity benefits more inclusive and streamline the process.
Key Updates to Gratuity Rules in 2025
The 2025 amendments have introduced the following major changes:
| Aspect | Previous Rule | New Rule (2025) |
|---|---|---|
| Minimum Service Requirement | 5 years | 1 year (includes temporary and contractual employees) |
| Tax-Free Gratuity Limit | ₹20 lakhs | ₹25 lakhs |
| Payment Mode | Manual or semi-digital | Through Shram Suvidha Portal (digital only) |
| Payment Deadline | Not strictly enforced | Must be paid within 30 days, or interest applies |
These revisions make the gratuity system more equitable, especially for private sector and non-permanent workers.
Gratuity Payment Process and Timelines
All gratuity claims must now be submitted and processed through the Shram Suvidha Portal, a centralized digital platform. This reduces paperwork, enhances tracking, and speeds up disbursement.
Employers are required to release gratuity payments within 30 days of eligibility. Delays beyond this period will attract additional interest, ensuring accountability and employee rights protection.
Gratuity Calculation and Financial Benefit
Gratuity is now calculated based on the employee’s last drawn salary plus dearness allowance (DA). This change increases the payout value for many employees.
Here’s a sample calculation:
| Last Monthly Salary (incl. DA) | Years of Service | Gratuity Amount |
|---|---|---|
| ₹30,000 | 10 years | ₹1,73,076 |
The formula used is:
Gratuity = (Last Salary × 15 × Years of Service) ÷ 26
This ensures a more substantial retirement corpus for long-serving employees.
Conclusion
The new gratuity rules in 2025 mark a progressive shift towards fairer, faster, and more inclusive employee benefits in India. With reduced service thresholds, higher tax-free limits, and a digital claims process, workers—especially in the private and contractual sectors—stand to gain significantly from these changes.
FAQs
What is the new tax-free gratuity limit?
The tax-free gratuity cap has been raised to ₹25 lakhs.
Where can gratuity claims be submitted?
Claims must be made through the Shram Suvidha Portal, a centralized government platform.
What happens if an employer delays gratuity payment?
If gratuity is not paid within 30 days, the employer must pay interest on the delayed amount.
How is gratuity calculated now?
It is based on the last drawn salary plus DA, using the formula:
(Salary × 15 × Years of Service) ÷ 26