Gratuity Limit Raised to ₹25 Lakh After DA Hits 50% for Defence Staff

MoD Implements 7th CPC Provision Following DA Increase from Jan 2024

In a significant relief for retiring defence personnel, the Ministry of Defence has enhanced the maximum limit of all types of gratuity for Central Government employees from ₹20 lakh to ₹25 lakh, following the hike in Dearness Allowance (DA) to 50% of basic pay.

The revision is in line with the recommendations of the 7th Central Pay Commission (7th CPC), which prescribed a 25% increase in the gratuity ceiling once DA crosses the 50% threshold. The enhancement is effective from 1st January 2024, the date from which the DA hike came into force.

What the Order Says

According to the Office Memorandum [F.No.17(2)/2016-D(P/P)-Vol-I] issued on 14th May 2025, the enhanced ceiling applies to all forms of gratuity including:

Retiring Gratuity
Retirement Gratuity
Service Gratuity
Invalid Gratuity
Special Gratuity
Terminal Gratuity
Death Gratuity

The revised limit has been implemented in respect of Commissioned Officers, Junior Commissioned Officers, and Other Ranks who have retired or died in harness on or after 01.01.2016, as per the Government’s earlier acceptance of 7th CPC recommendations.

Background and Legal Basis

This move comes in continuation of earlier guidelines laid out in MoD’s letter No. 17(02)/2016-D(Pen/Pol) dated 04.09.2017, which had initially capped gratuity at ₹20 lakh.

The Department of Expenditure had earlier issued an OM dated 12.03.2024 (OM No. 1/1/2024-E-II(B)) confirming the increase in DA from 46% to 50% of basic pay. In response, the Ministry of Defence has now formalised the resultant increase in gratuity limits, as per the 7th CPC clause 7.1.

Key Highlights

Revised Ceiling: ₹25 lakh (up from ₹20 lakh)
Trigger: DA reaching 50% of Basic Pay
Effective Date: 1st January 2024
Applicability: All kinds of gratuity under pensionary benefits
Beneficiaries: Retiring or deceased defence personnel on or after 01.01.2016

Finance Concurrence Obtained

The memorandum confirms that the decision was issued with the concurrence of the Finance Division of the Ministry, as per their ID Note dated 01.05.2025. A Hindi version of the order is also expected to follow soon.

View MoD Letter