Gratuity Rules Clarified: NPS Employees Can Get Dual Gratuity, Government Defines Limits and Conditions
The Central Government has issued a major clarification regarding gratuity payments for employees covered under the National Pension System (NPS). Through an official Office Memorandum (OM), the Department of Pension and Pensioners’ Welfare has clearly outlined when gratuity limits will apply and when employees will be eligible for full or dual gratuity benefits.
This clarification is especially significant for employees who have served in Public Sector Undertakings (PSUs), autonomous bodies, state governments, or the armed forces before joining Central Government service. The move aims to remove long-standing confusion and ensure uniform interpretation of gratuity rules under the NPS framework.
What the Government’s Office Memorandum Says
According to the OM, the Central Civil Services (Payment of Gratuity under NPS) Amendment Rules, 2025 introduce Rule 4A, which deals with cases where an employee has received gratuity from more than one organisation.
Rule 4A states that if a government employee has served both the Central Government and a PSU or autonomous body, and has received gratuity from both, then an overall ceiling on total gratuity may apply. The objective is to ensure that the combined gratuity does not exceed what would have been payable had the employee served continuously under the Central Government for the entire period.
Rules for Re-employment in Government Service
The OM also clarifies the position regarding employees who rejoin government service after retirement. If a person has already received gratuity due to superannuation, compulsory retirement, or compassionate grounds and is later re-employed, they will not be entitled to a fresh gratuity for the period of re-employment.
This provision ensures that gratuity remains a retirement benefit rather than a recurring entitlement through multiple appointments.
What Happens When an Employee Moves from PSU to Central Government
Employees who join Central Government service after working in a PSU or autonomous body—with proper permission—are eligible to receive gratuity for their government service. At the same time, the gratuity already received from the PSU or autonomous body will remain valid.
However, the combined gratuity from both services cannot exceed the amount that would have been payable if the employee had completed the entire service period under the Central Government and retired on the last drawn government salary.
Employees Who Served Under State and Central Governments
The Department has reiterated its earlier instructions dated February 12, 2020. As per these guidelines, if an employee has served under a State Government and later under the Central Government, and has received gratuity from both, then an overall limit will apply.
The total gratuity in such cases cannot exceed the amount that would have been admissible had the employee remained in continuous Central Government service until retirement at the same final pay.
Big Relief for Employees Moving from Military to Civil Service
One of the most important clarifications in the OM concerns employees who first served in the armed forces and later joined civil services. After consulting the Department of Expenditure, the government has clearly stated that no additional ceiling will apply in such cases.
This means that gratuity received for military service will not reduce or limit the gratuity payable for subsequent civil service. In effect, such employees are eligible for full gratuity for both services, offering substantial financial relief to veterans transitioning into civilian government roles.
Why This Clarification Matters
This clarification brings transparency and certainty for thousands of NPS-covered employees and pensioners. It particularly benefits those with diverse service backgrounds, including PSU professionals, state government employees, and ex-servicemen.
By clearly defining where gratuity limits apply and where they do not, the government has made gratuity rules simpler, fairer, and easier to understand. The move strengthens trust in the pension and retirement framework while ensuring that employees receive their rightful benefits without ambiguity.
