Gratuity — Delhi
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 the lump-sum terminal benefit the law forces an employer to pay you for sticking around. The threshold is five years of continuous service. Cross it and the cheque is statutory — not a bonus, not goodwill, not negotiable. The statute is the Payment of Gratuity Act, 1972, now layered with the Code on Social Security, 2020 (Chapter V, ss. 53-58), enforceable from 21 November 2025. The SS Code preserves the PG Act's core architecture — the 5-year rule, the 15/26 formula, the death/disability waiver — and grafts on new coverage for fixed-term employees, gig workers and platform workers under s. 53.
- Who qualifies (PG Act s. 4(1) / SS Code s. 53(1)): any employee in a factory, mine, oilfield, plantation, port, railway company, shop or establishment with 10 or more workers who has completed five years of continuous service.
- Death or permanent disablement waives the 5-year rule (PG Act s. 4(1) proviso; SS Code s. 53(1) proviso). The nominee or legal heir gets the gratuity from day one of service.
- Fixed-term employees — the big SS Code change. Under s. 53(2)(b) of the Code, fixed-term employees become entitled to gratuity on a pro-rata basis on completion of one year of continuous service — not five.
- The formula (PG Act s. 4(2); SS Code s. 54): last drawn (basic + dearness allowance) × 15 ÷ 26 × completed years of service. Twenty-six is the divisor because the statute treats a month as 26 working days. Fifteen days' wages per year is what you accrue.
- Basic + DA only. The wage definition in PG Act s. 2(s) and SS Code s. 2(88) excludes HRA, conveyance, bonus, overtime, commission and most allowances. Inflated CTC numbers do not enter the calculation. The SS Code adds one extension: if excluded allowances exceed 50% of total remuneration, the excess is deemed wages (s. 2(88)) — which can quietly raise the gratuity base.
- The 6-month rounding rule (PG Act s. 4(2)): service of more than six months in the final year counts as a full year; less than six months drops off. Seven years and seven months becomes eight; seven years and five months stays at seven.
- The 240-day rule (PG Act s. 2A). An employee who has worked 240 days in a year (190 days for underground mine workers) is deemed to have rendered one year of continuous service. The Madras HC in Mettur Beardsell Ltd. v. Regional Labour Commissioner and the Supreme Court trinity of Mohd. Ali, Mohan Lal and Surendra Kumar Verma have held that an employee who has clocked four years plus 240 days in the fifth year has satisfied the five-year requirement. Many HR teams still get this wrong and refuse on a literal-five-years reading.
- Statutory ceiling — ₹20 lakh tax-free. Under Income Tax Act, 1961, s. 10(10), gratuity received by a non-government employee is exempt from tax up to a cumulative lifetime ceiling of ₹20,00,000 (raised from ₹10 lakh by notification S.O. 1420(E) dated 29 March 2018). Anything above that ceiling is taxed at your slab rate. Government employees get unlimited exemption.
- Payment deadline — 30 days (PG Act s. 7(3)). The employer must pay within 30 days of gratuity becoming payable. Miss the deadline and simple interest at 10% per annum runs on the unpaid amount from the date it was due until the date it is paid — Central Government Notification S.O. 873(E) dated 1 October 1987 under s. 7(3-A). Not compound interest. Simple, but it runs from day 31, not from the date of the eventual order.
During the transition into the labour-code regime, two regimes are running side by side. At the central level the SS Code is in force from 21 November 2025; in states where the SS Code rules are not yet notified, the old Payment of Gratuity Act, 1972 framework continues. The substantive entitlement is the same under both — the difference is which inspector signs which form.
When does it apply?
Gratuity covers a wider net than people realise. You are entitled to claim if:
- You work in any factory, mine, oilfield, plantation, port, railway company, shop or establishment with 10 or more workers, and you have completed five years of continuous service with the same employer.
- You are a fixed-term employee who has completed at least one year of continuous service — under SS Code s. 53(2)(b) you are entitled to gratuity on a pro-rata basis even without the five-year threshold.
- You are a working journalist covered by the Working Journalists Act, 1955 — your threshold is three years, not five.
- You have died in service, or have been permanently disabled by accident or disease — the 5-year threshold does not apply, and the nominee or legal heir steps in to claim.
- You have completed four years and 240 days in the fifth year (or 190 days for underground mine workers) — the deemed-completion rule under PG Act s. 2A.
- Your employer has refused to pay, has short-paid, or is offering "ex gratia" or "goodwill" in place of the statutory amount.
The Act applies regardless of whether the establishment was covered at the time you joined. Once it crosses 10 workers, coverage attaches and continues even if the headcount later falls. The 5-year clock keeps ticking through approved leave, lay-off, strike (if not illegal), lockout and maternity leave. It pauses only for absences that the certified standing orders treat as a break in service.
What to Do If Your Employer in India Refuses to Pay Your Gratuity
Gratuity disputes are paper disputes. The forms are old, the Controlling Authority is a known address, and the worker who arrives with Form I filled out and the arithmetic done usually wins.
- Do the calculation yourself first. Take your last drawn basic + DA, multiply by 15, divide by 26, multiply by completed years. Apply the 6-month rounding. If your basic + DA is ₹30,000/month and you served 8 years and 7 months: (30,000 × 15 ÷ 26) × 9 = ₹1,55,769. That figure is what the employer owes you — anything less is short payment.
- Serve Form I (Notice of Claim) on your employer within 30 days of gratuity becoming payable (Rule 7, Payment of Gratuity (Central) Rules, 1972). If a nominee is filing after a death, that is Form J; legal heir without nomination is Form K. Send by registered post with acknowledgement, and keep the postal receipt — that is your evidence of service.
- The employer must respond on Form L (Notice for Payment of Gratuity) within 15 days (Rule 8), specifying the amount and a date for payment not later than 30 days after receipt of your Form I. If the employer disputes the amount or refuses, the employer files Form M. Silence is itself non-compliance.
- The 30-day clock. Once gratuity becomes payable (your last working day, or the date of death/disability), the employer has 30 days to pay (PG Act s. 7(3)). From day 31, simple interest at 10% per annum runs on the unpaid balance until the day the cheque clears — Central Government Notification S.O. 873(E), 1 October 1987, issued under s. 7(3-A). The Jharkhand HC in Tata Steel Limited v. State of Jharkhand (2024) confirmed the 10% rate cannot be reduced below the 1987 notification absent a fresh notification.
- If the employer refuses or short-pays, file Form N (application to the Controlling Authority) under s. 7 of the PG Act. The Controlling Authority is usually the Assistant Labour Commissioner or Deputy Labour Commissioner of the area where the establishment is located. The Ministry of Labour & Employment publishes the list of designated Controlling Authorities for the central sphere at clc.gov.in; state Labour Commissionerates publish their own lists. The Controlling Authority can order payment with 10% simple interest from the original due date.
- Limitation. File the Form N application within 90 days of the cause of action under Rule 10(1) — the Controlling Authority has discretion to condone delay if you can show sufficient cause (Rule 10(2)).
- Appeal: against the Controlling Authority's order, file an appeal with the Appellate Authority (usually the Joint or Additional Labour Commissioner) within 60 days under s. 7(7). Pre-deposit of the disputed amount is required.
- Recovery: if the employer still does not pay, the Controlling Authority issues a recovery certificate to the District Collector under s. 8 — the amount is then recovered as arrears of land revenue.
What should you NOT do?
- Do not resign in the last six months before your 5-year mark without doing the rounding math. Service of more than six months in the fifth year (i.e. 4 years and 7+ months) does not by itself round up to five — the 6-month rule only applies after the threshold is crossed. The deemed-completion route is the 4 years + 240 days rule under s. 2A.
- Do not assume your employer cannot forfeit your gratuity. Under PG Act s. 4(6), the employer can forfeit gratuity wholly or partly for (a) wilful omission or negligence causing damage or loss to the employer (capped at the loss caused), or (b) riotous or disorderly conduct, theft, fraud, or other misconduct constituting an offence involving moral turpitude. The Supreme Court in Western Coal Fields Ltd. v. Manohar Govinda Fulzele (2025 INSC 233, 17 February 2025) overruled the earlier line in C.G. Ajay Babu (2018) and held that a criminal conviction is not required for forfeiture under s. 4(6)(b)(ii) — a departmental inquiry finding that the misconduct amounts to an offence involving moral turpitude is sufficient.
- Do not accept "CTC included gratuity" as a reason for non-payment. Gratuity is a statutory terminal benefit. It is computed on basic + DA at the time of exit, not on CTC at the time of hire.
- Do not sign a "full and final settlement" for less than the statutory amount without speaking to a labour lawyer or the union. The Controlling Authority can still entertain a claim despite an FFS — but the FFS adds a layer of contested defence the employer will run on.
- Do not let the 90-day limitation run. Form N has a 90-day clock under Rule 10(1). Delay can be condoned, but the application has to plead sufficient cause — and the longer the delay, the harder the case.
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 do I become eligible for gratuity in India?
Under PG Act s. 4(1) and SS Code s. 53(1), you become eligible after completing five years of continuous service with the same employer. The five-year rule is waived if you die in service or are permanently disabled by accident or disease. Under PG Act s. 2A, working 240 days in a year (190 days for underground mine workers) is deemed one year of continuous service — so the Madras HC and the Supreme Court (Mohd. Ali, Mohan Lal, Surendra Kumar Verma) have held that 4 years and 240 days in the fifth year satisfies the threshold. Fixed-term employees become eligible at one year of continuous service on a pro-rata basis under SS Code s. 53(2)(b). Working journalists qualify after three years.
How is gratuity calculated in India?
The statutory formula under PG Act s. 4(2) and SS Code s. 54 is: (last drawn basic + dearness allowance) × 15 ÷ 26 × completed years of service. The 26 is because a month is treated as 26 working days; the 15 is the number of days' wages per year of service. The 6-month rounding rule says more than six months in the final year counts as a full year, less than six months drops off. Crucially, the calculation runs on basic + DA only — not on CTC, gross salary, HRA, bonus or any allowances. If your basic + DA is ₹40,000/month and you served 10 years and 8 months, you get (40,000 × 15 ÷ 26) × 11 = ₹2,53,846.
Can my employer forfeit my gratuity for misconduct?
Yes, but only on narrow statutory grounds under PG Act s. 4(6). Partial or full forfeiture is permitted for: (a) wilful omission or negligence causing damage or loss to the employer (forfeiture is capped at the amount of loss caused), or (b) riotous or disorderly conduct, theft, fraud, or any other misconduct constituting an offence involving moral turpitude committed in the course of employment. The Supreme Court in Western Coal Fields Ltd. v. Manohar Govinda Fulzele (2025 INSC 233, 17 February 2025) overruled the earlier C.G. Ajay Babu line and held that a criminal conviction is not required — a properly conducted departmental inquiry finding moral-turpitude misconduct is enough. The employer must still follow natural justice (charge sheet, inquiry, opportunity to be heard) and the forfeiture must be proportionate to the misconduct.
What if I'm on a fixed-term contract?
Under Section 53(2)(b) of the Code on Social Security, 2020 — enforceable from 21 November 2025 — fixed-term employees become entitled to gratuity on a pro-rata basis after completing one year of continuous service. The standalone five-year threshold continues to apply to permanent employees, but the SS Code explicitly carves out fixed-term contracts and brings them within the gratuity net at the one-year mark. The pro-rata calculation still uses the 15/26 formula — so for a fixed-term employee who completes 18 months on a basic + DA of ₹30,000/month, gratuity is approximately (30,000 × 15 ÷ 26) × 1.5 = ₹25,962.
How long does my employer have to pay my gratuity?
Thirty days from the date gratuity becomes payable, under s. 7(3) of the Payment of Gratuity Act. From day 31, simple interest at 10% per annum runs on the unpaid amount under Central Government Notification S.O. 873(E) dated 1 October 1987 (issued under s. 7(3-A) PG Act). It is simple interest, not compound, but it runs from the original due date — not from the date the Controlling Authority eventually orders payment.
What is the gratuity right in India?
Gratuity is the lump-sum terminal benefit the law forces an employer to pay you for sticking around. The threshold is five years of continuous service. Cross it and the cheque is statutory — not a bonus, not goodwill, not negotiable. The statute is the Payment of Gratuity Act, 1972, now layered with the Code on Social Security, 2020 (Chapter V, ss. 53-58), enforceable from 21 November 2025. The SS Code preserves the PG Act's core architecture — the 5-year rule, the 15/26 formula, the death/disability waiver — and grafts on new coverage for fixed-term employees, gig workers and platform workers...
When does gratuity apply?
Gratuity covers a wider net than people realise. You are entitled to claim if:You work in any factory, mine, oilfield, plantation, port, railway company, shop or establishment with 10 or more workers, and you have completed five years of continuous service with the same employer.You are a fixed-term employee who has completed at least one year of continuous service — under SS Code s. 53(2)(b) you are entitled to gratuity on a pro-rata basis even without the five-year threshold.You are a working journalist covered by the Working Journalists Act, 1955 — your threshold is three years, not five.Yo...
What should I do if my employer in India refuses to pay my gratuity after I leave?
Gratuity disputes are paper disputes. The forms are old, the Controlling Authority is a known address, and the worker who arrives with Form I filled out and the arithmetic done usually wins.Do the calculation yourself first. Take your last drawn basic + DA, multiply by 15, divide by 26, multiply by completed years. Apply the 6-month rounding. If your basic + DA is ₹30,000/month and you served 8 years and 7 months: (30,000 × 15 ÷ 26) × 9 = ₹1,55,769. That figure is what the employer owes you — anything less is short payment.Serve Form I (Notice of Claim) on your employer within 30 days of gratu...
What mistakes should I avoid with gratuity?
Do not resign in the last six months before your 5-year mark without doing the rounding math. Service of more than six months in the fifth year (i.e. 4 years and 7+ months) does not by itself round up to five — the 6-month rule only applies after the threshold is crossed. The deemed-completion route is the 4 years + 240 days rule under s. 2A.Do not assume your employer cannot forfeit your gratuity. Under PG Act s. 4(6), the employer can forfeit gratuity wholly or partly for (a) wilful omission or negligence causing damage or loss to the employer (capped at the loss caused), or (b) riotous or d...
Gratuity in other states
Same topic, different jurisdiction. Pick the one that applies to you.