Section 4. Payment of gratuity.

(1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,—

(a) on his superannuation, or

(b) on his retirement or resignation, or

Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement:

^3[Provided further that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs is a minor, the share of such minor, shall be deposited with the controlling authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority.]

Explanation.—For the purposes of this section, disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disablement.

(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days’ wages based on the rate of wages last drawn by the employee concerned:

Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account:

Provided further that in the case of ^1[an employee who is employed in a seasonal establishment and who is not so employed throughout the year], the employer shall pay the gratuity at the rate of seven days’ wages for each season.

^2[Explanation.—In the case of a monthly rated employee, the fifteen days’ wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen.]

(3) The amount of gratuity payable to an employee shall not exceed ^3[ ^4[such amount as may be notified by the Central Government from time to time] ].

(4) For the purpose of computing the gratuity payable to an employee who is employed, after his disablement, on reduced wages, his wages for the period preceding his disablement shall be taken to be the wages received by him during that period, and his wages for the period subsequent to his disablement shall be taken to be the wages as so reduced.

(5) Nothing in this section shall affect the right of an employee receive better terms of gratuity under any award or agreement or contract with the employer.

(6) Notwithstanding anything contained in sub-section (1),—

(a) the gratuity of an employee, whose services have been terminated for any act, wilful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer, shall be forfeited to the extent of the damage or loss so caused;

(b) the gratuity payable to an employee ^5[may be wholly or partially forfeited]—

(i) if the services of such employee have been terminated for his riotous or disorderly conduct or any other act violence on his part, or

(ii) if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment.

6* * * * *

View Act Footnotes

Note: In the legacy archives, footnotes are grouped by original PDF page numbers rather than by section.

Page 2

1. Ins. by Act 26 of 1984, s. 2 (w.e.f. 18-5-1984).
2.16th September, 1972, vide notification No. S.O. 601(E), dated 16th September, 1972, see Gazette of India, Extraordinary, PartII, sec. 3(ii).
3. Subs. by Act 26 of 1984, s. 3, for clause (c) and the Explanations (w.e.f. 18-5-1984).*. Vide notification No. S.O. 3912(E), dated 30th October, 2019, this Act is made applicable to the Union territory of Jammu andKashmir and the Union territory of Ladakh.

Page 3

1. Subs. by Act 47 of 2009, s. 2, for clause (e) (w.e.f. 3-4-1997).
2. Subs. by Act 22 of 1987, s. 2, for “and the widow” (w.e.f. 1-10-1987).
3. The proviso omitted by s. 2, ibid. (w.e.f. 1-10-1987).
4. Subs. by Act 12 of 2018, s. 2, for clause (k) (w.e.f. 29-3-2018).

Page 4

1. Subs. by Act 25 of 1984, s. 2, for clause (r) (w.e.f. 1-7-1984).
2. Ins. by Act 26 of 1984, s. 4 (w.e.f. 18-5-1984).
3. The words “imposing a punishment or penalty or” omitted by Act 22 of 1987, s. 3 (w.e.f. 1-10-1987).

Page 5

1. Explanation inserted by Act 22 of 1987, s. 3 (w.e.f. 1-10-1987).
2. Subs. by Act 12 of 2018, s. 3, for “twelve weeks” (w.e.f. 29-3-2018).
3. Subs. by Act 22 of 1987, s. 4, for the second proviso (w.e.f. 1-10-1987).

Page 6

1. Subs. by Act 25 of 1984, s. 3, for “an employee employed in a seasonal establishment” (w.e.f. 1-7-1984).
2. Explanation inserted by Act 22 of 1987, s. 4 (w.e.f. 1-10-1987).
3. Subs. by Act 15 of 2010, s. 2, for “three lakhs and fifty thousand rupees” (w.e.f 24-5-2010).
4. Subs. by Act 12 of 2018, s. 4, for “ten lakh rupees” (w.e.f. 29-3-2018).
5. Subs. by Act 25 of 1984, s. 3, for “shall be wholly forfeited” (w.e.f. 1-7-1984).
6. Sub-section (7) omitted by Act 34 of 1994, s. 3 (w.e.f 24-5-1994).
7. Ins. by Act 22 of 1987, s. 5 (w.e.f. 1-10-1987).

Page 7

1. Section 5 renumbered as sub-section (1) thereof by Act 26 of 1984, s. 5 (w.e.f. 18-5-1984).
2. Ins. by s. 5, ibid. (w.e.f. 18-5-1984).
3. Ins. by Act 22 of 1987, s. 6 (w.e.f. 1-10-1987).

Page 8

1. Subs. by Act 22 of 1987, s. 7, for sub-section (3) (w.e.f. 1-10-1987).
2. The Explanation omitted by Act 25 of 1984, s. 4 (w.e.f. 1-7-1984).
3. Ins. by s. 4, ibid. (w.e.f. 1-7-1984).
4. Subs. by s. 4, ibid., for clause (c) (w.e.f. 1-7-1984).
5. Clause (c) re-lettered as clause (d) thereof by s. 4, ibid. (w.e.f. 1-7-1984).
6. Clause (d) re-lettered as clause (e) thereof by s. 4, ibid. (w.e.f. 1-7-1984).

Page 9

1. Subs. by Act 25 of 1984, s. 4, for “nominee” (w.e.f. 1-7-1984).
2. The proviso ins. by s. 4, ibid. (w.e.f. 1-7-1984).
3. Ins. by s. 5, ibid. (w.e.f. 1-7-1984).

Page 10

1. Subs. by Act 22 of 1987, s. 8, for “at the rate of nine per cent. per annum” (w.e.f. 1-10-1987).
2. The provisos inserted by s. 8, ibid. (w.e.f. 1-10-1987).
3. Subs. by s. 9, ibid., for “one thousand rupees” (w.e.f. 1-10-1987).
4. Subs. by s. 9, ibid., for certain words (w.e.f. 1-10-1987).
5. Subs. by s. 9, ibid., for “three months” (w.e.f. 1-10-1987).

Page 11

1. Subs. by Act 34 of 1994, s. 4, for “Presidency Magistrate or a Magistrate of the first class” (w.e.f. 24-5-1994).
2. Ins. by Act 25 of 1984, s. 6 (w.e.f. 1-7-1984).