Big Relief: NPS Government Employees Now Get Gratuity Along With Lump-Sum Benefits

If you’re a central government employee who joined service on or after January 1, 2004, you’ve likely wondered whether you’d get the same retirement benefits as colleagues who retired under the old pension system.

Earlier, under the National Pension System (NPS), pensions shifted from guaranteed payments to market-linked savings, creating confusion, especially about gratuity.

Now, the government has officially clarified: you will get gratuity along with your lump-sum NPS withdrawal when you retire. This decision was announced by the Ministry of Personnel, Public Grievances and Pensions.

Why This Matters for You

Previously, many NPS employees believed the 60% lump-sum withdrawal from their NPS account replaced gratuity, creating doubts and making retirement planning difficult.

This clarification removes that confusion. Both benefits can be claimed—gratuity is separate from your NPS withdrawal.

Since gratuity is a significant amount—equal to 15 days’ salary for every year of service (up to ₹20 lakh)—this ensures you’ll have more money to support yourself and your family after retirement.

Who Gets This Benefit?

If you have completed at least 5 years of service, you’re entitled to gratuity. But even if you haven’t finished 5 years and retire because of medical reasons, you can still receive gratuity.

This rule also applies to employees who retired in the last 2 years. So if you’re one of them, you should approach your department to claim your pending benefits.

Why This Makes NPS More Fair

One major criticism of the NPS was that it felt less secure than the old pension scheme. This new clarification helps close that gap by guaranteeing gratuity is part of your retirement package.

Now, the system is more similar to the earlier scheme, giving you better financial protection and reassurance that your future isn’t compromised because you joined service after 2004.

What You Should Do Now

If you’re retiring soon or have retired in the past 2 years, check if you’re eligible for gratuity. Visit your HR or personnel department and ensure all your paperwork and records are up to date.

Make sure your retirement documents clearly show that you are entitled to gratuity along with your NPS withdrawal.

Read More: Key Financial Changes from July 2025: Aadhaar-PAN Linking, Taxes, Railways, HDFC Credit Cards, and More!

Conclusion

This new rule is a major win for thousands of central government employees under NPS. It provides certainty, strengthens trust, and helps you plan your retirement with confidence. With both gratuity and lump-sum payouts, your financial future is more secure, allowing you to support your family, invest, or meet healthcare expenses with peace of mind.

Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in securities are subject to market risks. Read all related documents carefully before investing.