Gratuity in Delhi
Reviewed by the Commoner Law Editorial Team. Sourced from Indian central (Union) law — Constitution of India, central Acts of Parliament, and Supreme Court decisions. State-level information reflects each state's own Acts and High Court rulings. Written in plain language for general understanding — this is educational content, not legal advice. Our editorial standards
What is this right?
Gratuity is a statutory terminal benefit payable by an employer to an employee who has completed at least five years of continuous service.
- Eligibility: Any employee (factory worker, plantation worker, mine worker, oilfield employee, port employee, or employee of an establishment with 10+ workers) who has completed 5 years of continuous service.
- If an employee dies or is permanently disabled, gratuity is payable even if 5 years have not been completed.
- Formula: (Last drawn basic salary + DA) × 15/26 × Number of completed years of service. Each year beyond 6 months counts as a full year; fractions below 6 months are ignored.
- Tax exemption: Gratuity up to ₹20 lakh is fully exempt from income tax for non-government employees (s. 10(10), Income Tax Act).
- Gratuity must be paid within 30 days of it becoming payable. Delays attract compound interest at the rate prescribed by the Central Government.
When does it apply?
- You resign, retire, or are retrenched after completing 5 years of continuous service with the same employer.
- You die or become permanently disabled while in service (5-year rule does not apply in these cases).
- Your employer refuses to pay or calculates gratuity at a lower amount than due.
What to Do If Your Employer in India Refuses to Pay Your Gratuity
- Submit Form I (Notice of Claim) to your employer within 30 days of gratuity becoming payable (or after death/disability, by your nominee/legal heir).
- Your employer must respond with Form L (Notice of Payment) within 15 days, specifying the amount and date of payment.
- If the employer refuses or pays less, file an application before the Controlling Authority (typically the Labour Commissioner) under s. 7 of the Act — the Controlling Authority can direct payment plus 10% per annum interest on delayed amounts.
- Appeals against the Controlling Authority's order lie to the Appellate Authority (within 60 days).
What should you NOT do?
- Do not resign just before completing 5 years without calculating whether gratuity is due — service just past the 4-year 6-month mark (treated as 5 full years) can trigger entitlement.
- Do not forfeit gratuity by committing an act of wilful omission or negligence causing loss/damage — gratuity can be forfeited wholly or partially in such cases (s. 4(6)).
- Do not accept a private settlement for less than the statutory amount without consulting a labour lawyer first.
How Delhi differs from central law
Gratuity in Delhi follows the central Payment of Gratuity Act, 1972, but the Delhi Labour Department is the controlling authority for gratuity claims within the NCT.
- All establishments in Delhi with 10 or more employees at any point in the preceding 12 months must pay gratuity to employees who have completed 5 or more years of continuous service.
- The calculation is 15 days' wages for every completed year of service (7 days for seasonal workers), subject to the maximum ceiling set by the Central Government (currently Rs 25 lakh).
- The Assistant Labour Commissioner (Central), Delhi is the Controlling Authority for gratuity disputes. If your employer denies or underpays gratuity, you file a claim with this office.
- The Delhi High Court has held in multiple cases that the 5-year requirement is relaxed in cases of death or disablement — gratuity is payable regardless of length of service in such situations.
Additional Steps in Delhi
File a gratuity claim (Form I under the Payment of Gratuity Rules) with the Assistant Labour Commissioner (Central), Government of NCT of Delhi. The claim must be filed within 30 days of it becoming due (extensions are possible with good cause). Appeals lie to the appellate authority and then to the Delhi High Court.
Relevant Law: Payment of Gratuity Act, 1972; Payment of Gratuity (Central) Rules, 1972; Delhi Labour Department notifications
Common Questions
When does gratuity apply?
You resign, retire, or are retrenched after completing 5 years of continuous service with the same employer.You die or become permanently disabled while in service (5-year rule does not apply in these cases).Your employer refuses to pay or calculates gratuity at a lower amount than due.
What should I do if my employer in India refuses to pay my gratuity after I leave?
Submit Form I (Notice of Claim) to your employer within 30 days of gratuity becoming payable (or after death/disability, by your nominee/legal heir).Your employer must respond with Form L (Notice of Payment) within 15 days, specifying the amount and date of payment.If the employer refuses or pays less, file an application before the Controlling Authority (typically the Labour Commissioner) under s. 7 of the Act — the Controlling Authority can direct payment plus 10% per annum interest on delayed amounts.Appeals against the Controlling Authority's order lie to the Appellate Authority (within 60...
What mistakes should I avoid with gratuity?
Do not resign just before completing 5 years without calculating whether gratuity is due — service just past the 4-year 6-month mark (treated as 5 full years) can trigger entitlement.Do not forfeit gratuity by committing an act of wilful omission or negligence causing loss/damage — gratuity can be forfeited wholly or partially in such cases (s. 4(6)).Do not accept a private settlement for less than the statutory amount without consulting a labour lawyer first.
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