The “Gratuity Rules 2025” are an enormous revolution when it comes to the management of employee gratuity in India. The recent amendment moves further to explain clearly the issue of who is eligible, stepwise, then payment, the tax benefits—this is the whole process making it very unburdening, fast and more equitable to the employees. Just to mention one of new rules: it has become a must for employers to dispense the gratuity within 30 days after the employee’s leaving cutting down on unpredictability and waiting times.
Requirements & Service Counting Broadening
Previously, an employee had to provide five years of uninterrupted service to be eligible for gratuity. The rules of 2025 make things a little easier. For instance, an employee who has completed four years and has worked for 240 days may qualify for gratuity if the work week is five days. Furthermore, the changes make it clear that the same holds good for contract workers, people in the gig-economy and those switching between employers: time worked in state companies or public sector units (PSUs) can now be included in the computation of gratuity for central government jobs. Also, the five years condition is not applicable in death or disability case—thus improving the support for the deceased person’s family.
Changes In Calculation, Tax & Payment
The commonly accepted gratuity formula—(Last drawn salary × 15) ÷ 26 × Years of Service—stays the same in principle. However, what is new is the seasonal worker’s clarification (computed at one week per season) and stricter definition that “Basic + DA” must constitute at least 50 % of salary for calculation purpose. The tax point of view also accounts for the raising of the tax-free limit for gratuity in the private sector: the limit has been doubled from ₹10 lakh to ₹20 lakh for private employees, and for government employees the limits applied maybe even higher or not capped. Besides, the timelines for payments have also been made more stringent: employers are now liable to pay interest penalties (e.g.10% per annum) if gratuity payment is delayed beyond the stipulated period.
What to Do – Employers & Employees
- Employees are to verify: • The correct depiction of their service records (transfers included).
- That the components of their salary for gratuity calculation are Basic+DA as required.
- That the employer is informed about the 30-day payment deadline and interest for late payments.
- Employers are to make adaptations in their HR/systems to the following: Digitised filing of gratuity claims and tracking of timelines.
- The consideration of contract/gig workers if eligible.
- The redefinition of payroll/salary terms so that Basic+DA meet the 50% threshold.
Also Read: 7th Pay Commission Update 2025: Expected DA Increase, Effective Date & Arrears Details