By S&S Co. Advocates & Solicitors · Published 10 September 2026 · Informational content, not legal advice: see our disclaimer
Who Is Entitled to Gratuity, and When
The Payment of Gratuity Act, 1972 applies to establishments employing ten or more persons and entitles an employee to gratuity on the termination of employment after rendering continuous service of at least five years: whether that termination is by superannuation, retirement, resignation, or death or disablement due to accident or disease, in which case the five-year requirement is waived. Gratuity is calculated at fifteen days' wages for every completed year of service (or part thereof exceeding six months), based on the employee's last drawn wages, subject to the statutory ceiling revised periodically by government notification.
The Employer's Payment Timeline
Once gratuity becomes payable, the employer is required to determine the amount and pay it within thirty days from the date it becomes due to the person entitled to it. Delayed payment attracts simple interest for the period of delay, and an employee who does not receive payment within this window, or receives less than what is due, may make an application to the Controlling Authority appointed under the Act for a direction to the employer to pay the correct amount together with interest.
The Narrow Grounds on Which Gratuity Can Be Forfeited
Section 4(6) of the Act permits forfeiture only in specific circumstances: wholly or partly, where the employee's services are terminated for wilful omission or negligence causing damage or loss to the employer's property (limited to the extent of the loss), and wholly, where the termination is for riotous or disorderly conduct or any other act of violence, or for an offence involving moral turpitude committed in the course of employment. Critically, forfeiture requires an actual, completed order of termination that records the specific ground relied upon: a pending inquiry, an unproven allegation, or a general assertion of misconduct is not sufficient to justify withholding gratuity.
What an Employee Can Do If Gratuity Is Wrongly Withheld
An employee whose gratuity is withheld without a valid Section 4(6) basis, or who receives a delayed or short payment, can approach the Controlling Authority under the Act with a Form N application. The Controlling Authority has the power to direct payment along with interest, and its order is appealable to the Appellate Authority. Employees should retain their appointment letter, salary records and any termination or resignation correspondence, as these typically form the core documentary basis for a gratuity claim.
Frequently Asked Questions
Does an employee need to complete exactly five years to be eligible for gratuity?
Generally yes. Five years of continuous service is the threshold for eligibility on resignation, retirement or superannuation, though courts have in some cases treated an employee who has completed four years and 240 days in the final year as having completed continuous service for this purpose. The five-year requirement does not apply where the termination is due to death or disablement.
Can an employer withhold gratuity because an internal inquiry is pending?
No. Forfeiture under Section 4(6) of the Payment of Gratuity Act requires an actual, completed order of termination that records one of the specific statutory grounds. A pending or unresolved inquiry is not, by itself, a valid basis to withhold gratuity.
What happens if an employer delays paying gratuity beyond thirty days?
The employer becomes liable to pay simple interest on the delayed amount from the date it fell due until actual payment, and the employee can apply to the Controlling Authority under the Act for a direction to pay the principal amount together with interest.
Is there a maximum limit on how much gratuity can be paid?
Yes, the Act prescribes a statutory ceiling on the amount payable, which is periodically revised by government notification. Employers and employees should check the currently applicable ceiling, since it has been revised more than once in recent years.
References & Further Reading
This article references the following statutory provisions. Readers should always verify current rules, fees and timelines against the applicable statute and rules as amended, since these are revised from time to time.
- Payment of Gratuity Act, 1972, Sections 4 and 4(6).
- Payment of Gratuity (Central) Rules, 1972, Form N: application to the Controlling Authority.