India Payroll RulesGratuity rules: sections 53 and 54
Chapter V of the Code on Social Security, 2020 deals with gratuity. These are its rules in plain words, read on 13 November 2026 from the Act as published on India Code.
Who gets it, section 53(1)
An employee who has rendered continuous service for not less than five years, when employment ends by superannuation, by retirement or resignation, by death or disablement due to accident or disease, by expiry of the contract under fixed term employment, or on an event the Central Government notifies. Working journalists need three years. The five years are not necessary for death, disablement, expiry of fixed term employment or a notified event, and a nominee or the heirs receive the gratuity of a deceased employee.
The amount, section 53(2) and Explanation 3
Fifteen days’ wages (or the number of days the Central Government notifies) for every completed year of service or part in excess of six months, on the wages last drawn. For a monthly-rated employee fifteen days’ wages = monthly wages ÷ 26 × 15. Piece-rated employees: the daily wage is the average of the last three months, without overtime. Seasonal establishments: seven days’ wages for each season. Fixed-term and deceased employees: pro rata.
The maximum, section 53(3)
The gratuity shall not exceed the amount notified by the Central Government. The Code names no figure.
Continuous service, section 54
Uninterrupted service, including time lost to sickness, accident, leave, authorised absence, lay-off, strike or lock-out. An employee who is not in continuous service for a year is treated as in continuous service for that year if the employee worked at least 240 days in the twelve months before (190 days underground in a mine or in an establishment that works less than six days a week), and for six months if at least 120 days in the preceding six months (95 days in the shorter-week case).
Gratuity by wages and years (regular employee, no ceiling)
| Wages a month | 5 years | 10 years | 20 years | 30 years |
|---|---|---|---|---|
| ₹20,000 | ₹57,692 | ₹1,15,385 | ₹2,30,769 | ₹3,46,154 |
| ₹40,000 | ₹1,15,385 | ₹2,30,769 | ₹4,61,538 | ₹6,92,308 |
| ₹60,000 | ₹1,73,077 | ₹3,46,154 | ₹6,92,308 | ₹10,38,462 |
| ₹1,00,000 | ₹2,88,462 | ₹5,76,923 | ₹11,53,846 | ₹17,30,769 |
Common questions
Does a part of a year count?
Yes, but only if it is more than six months. Section 53(2) pays for every completed year of service or part in excess of six months, so 10 years 7 months counts as 11 and 10 years 6 months counts as 10.
What if gratuity is forfeited?
Section 53(6): gratuity is forfeited to the extent of damage or loss where termination is for an act, wilful omission or negligence causing damage to property, and may be wholly or partly forfeited where termination is for riotous or disorderly conduct or violence, or an offence involving moral turpitude committed in the course of employment.
Does the Code allow a better deal in a contract?
Yes. Section 53(5) says nothing in the section affects the right to receive better gratuity terms under an award, agreement or contract with the employer.
Sources
- The Code on Social Security, 2020 (Act 36 of 2020), India Code: section 53 (payment of gratuity), section 54 (continuous service) and section 2(88) (wages). Text downloaded from indiacode.nic.in and read on 13 November 2026.
- The Code on Wages, 2019 (Act 29 of 2019, text as on 21 November 2025), India Code: section 17 (time limit for payment of wages) and section 26 (bonus). indiacode.nic.in, read on 13 November 2026.
- Press Information Bureau, "Code on Social Security, 2020: Towards Universal and Inclusive Social Protection" (pib.gov.in): gratuity for fixed-term employees after one year, and the wage definition.
Rules read on 13 November 2026 from the Codes named above. Several amounts are fixed by notifications or rules that are not in the Codes (the gratuity ceiling, the bonus wage limit). Check the current notification before you pay. This site is independent, not connected with any government, and gives information, not legal advice.