The Payment of Gratuity Act, 1972, has been amended extensively by the Indian government. Gratuity Rule Change as part of its policy reforms in 2025. Although the amendments are intended to update retirement benefits and synchronize them with inflation and evolving workforce patterns, certain categories of employees might lose gratuity benefits. Let us explore the changes in detail, impacted employees, and their implications.
Increased Tax-Free Limit: Government employees now enjoy a tax-free gratuity ceiling of ₹25 lakh, whereas private sector employees still enjoy a ₹20 lakh exemption. This is unequal.
Increase in Eligibility: Contract government employees are eligible for gratuity after five years of service. Maternity leaves and earned leaves can also be included in continuous service.
Tighter Rules for Forfeiture: Gratuity can fully be forfeited due to a wrong like fraud or theft.
Employees under Risk of Loosing Gratuity Perks
Certain categories have disproportionate burden falling upon them through the new rule:
Employees of Private Companies Working in Small Businesses: Gratuity Act only deals with enterprises which employ no less than 10 employees. The Employees in small enterprises lose recourse of law and payment of gratuity becomes an discretion.
Employees Dismissed for Misbehaviour: Individuals who are dismissed for gross misbehaviour or criminal acts, i.e., misappropriation of funds, lose their claim to gratuity.
High-Income Private Sector Employees: Over ₹20 lakh gratuity amounts are taxable from private sector workers in contrast with government employees entitled to a waiver of ₹25 lakh.
Gig and Contract Employees: Because they lack the permanent employment contract, most gig employees do not qualify for gratuity benefits.
Implication on Employees
The reforms intend to make policies on gratuity more logical but also identify discrepancies between private and public sector employees. Employees of smaller companies and informal sectors are in serious risk. Necessitating more reforms so that they do not lag behind.
The 2025 gratuity regulations amendments are the government’s effort towards innovation of retirement benefits. Nevertheless, leaving out some groups of employees is questionable on the aspects of fairness and coverage. Employees should stay vigilant and opt for other monetary planning alternatives for protection on their futures.
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