Govt Clarifies Gratuity Rules Under NPS: Which Employees Are Eligible and Who Misses Out

The Central government has clarified who qualifies for gratuity under the Central Civil Services (Payment of Gratuity under National Pension System) Rules, 2021. The Department of Pension & Pensioners’ Welfare (DoP&PW) said it has received several queries about whether employees covered under the NPS are eligible for gratuity after resignation.

What Is Retirement Gratuity?

Retirement gratuity is a lump-sum payment made to government employees upon retirement. To qualify, one must complete at least 5 years of service. The gratuity amount is calculated as one-fourth of a month’s basic pay plus dearness allowance (DA) for every 6-month period of qualifying service.

For employees with 33 years or more of service, the maximum gratuity payable is 16.5 times the basic pay plus DA, subject to a cap of ₹25 lakh.

What Is Death Gratuity?

Death gratuity is a one-time benefit given to the nominee or family of a government employee who dies while in service. There is no minimum service period required.

The amount varies based on the employee’s years of service:

• Less than 1 year – 2 times salary
• 1–5 years – 6 times salary
• 5–11 years – 12 times salary
• 11–20 years – 20 times salary
• More than 20 years – half of the salary for every 6-month period

Eligibility Under Rule 22

Rule 22 of the 2021 Gratuity Rules outlines who qualifies for retirement and death gratuity under NPS. Eligible employees include:

1. Those retiring as per Fundamental Rule 56 or Rule 12 of NPS Implementation Rules, 2021.
2. Employees opting for voluntary retirement under the Special Voluntary Retirement Scheme (SVRS) after being declared surplus.
3. Employees absorbed into a government-owned or controlled organisation or corporation.

Gratuity is payable only upon retirement after 5 years of qualifying service, not in the case of a standard resignation.

Rule 17: Resignation and Loss of Benefits

Under Rule 17, when a government employee resigns, their past service is forfeited, meaning it won’t count for pension or gratuity benefits.
However, exceptions exist:

• If the resignation is to take another government job (with approval), past service remains protected.
• If the resignation is due to absorption in a government-controlled body, service continuity is maintained.

Rule 32: Absorption in Government-Controlled Bodies

Rule 32 states that an employee absorbed into a government-controlled corporation or company is treated as retired from government service. They become eligible for gratuity based on their last drawn salary and total qualifying service.

Read More, NPS Rule Changes From October 1: 100% Equity Option, Flexible Withdrawals, and Multiple Schemes!

Conclusion

The government has made it clear that gratuity under NPS is not available to employees who resign voluntarily. Only those retiring officially, taking up another government post through proper procedure, or being absorbed into a government-run organisation can claim the benefit. Employees should therefore plan career moves carefully to avoid losing their long-term retirement benefits.

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