Gratuity is a lump sum your employer must pay when you leave after at least five years of continuous service. It is a legal right, not a bonus. If the employer delays or refuses, you can claim it before the government authority that decides gratuity disputes, and the employer has to pay interest for the delay.
The law changed on 21 November 2025. The Payment of Gratuity Act, 1972 was replaced by the Code on Social Security, 2020, which carries over the same basic rules and adds a few. Many employers, payslips and websites still refer to the old Act. For most people leaving a job in Bengaluru in 2026, the eligibility and the formula work the same way as before.
What has changed is the paperwork. Karnataka’s own rules under the new Code were still being finalised at our last check, so the claim form and the office you file with may differ from what older guides say.
Who is entitled to gratuity
Gratuity applies to establishments with 10 or more employees. Once it applies, it keeps applying even if the headcount later falls.
You qualify when your employment ends after five years of continuous service, whether by:
- resignation
- retirement or superannuation
- termination or retrenchment, unless you were dismissed for specific misconduct that the law allows gratuity to be forfeited for
The five-year condition does not apply when employment ends because of death or disablement. In a death case, gratuity goes to the nominee or the legal heirs.
Two points people often miss:
- Four years and 240 days usually counts as five years. The law counts a year of continuous service if you worked at least 240 days in it. The Labour Ministry’s own FAQs on the Codes say the same.
- Fixed-term employees now get gratuity on a pro rata basis after one year of service, under the new Code. Under the old Act they had to complete five years like everyone else.
How gratuity is calculated: the 15/26 formula
For monthly paid employees, the standard formula is:
Last drawn wages × 15 ÷ 26 × completed years of service
“Wages” here means basic pay plus dearness allowance. The 26 is the number of working days in a month. A part year of more than six months counts as a full year.
So someone with a last basic plus DA of ₹52,000 and 8 years and 7 months of service would get:
52,000 × 15 ÷ 26 × 9 = ₹2,70,000
There is one change under the new Code that can raise the figure. If your allowances are more than half of your total pay, the excess is added back to “wages” for gratuity. Many salary structures in Bengaluru keep basic pay low and allowances high, so this matters. Ask for a fresh calculation if your employer used only basic pay.
Seasonal establishments use 7 days’ wages per season instead of 15.
The ceiling: ₹20 lakh
The maximum gratuity payable under the law is ₹20 lakh. That figure was set in 2018 and continues under the new Code until the Central Government changes it. In 2024, the government raised the limit for central government employees under their own service rules, but that does not apply to private sector staff.
An employer can always pay more under its own policy or your contract. The ceiling only limits what the law forces the employer to pay.
When gratuity must be paid, and interest for delay
The employer must work out the gratuity as soon as it becomes payable, give you written notice of the amount, and pay within 30 days. It has to do this even if you have not applied.
If it pays late, it must pay simple interest from the date it fell due, at a rate set by the Central Government. If it disputes part of the amount, it must still pay or deposit what it admits.
Step by step: claiming gratuity not paid
1. Apply to the employer in writing
Send a written application for gratuity, by email and by registered post, stating your joining and leaving dates, your last wages, and your calculation. Under the old rules this was Form I. Under the new Code rules, the forms have different numbers. Use whatever form your employer’s HR or the labour office asks for, but do not wait for a form to send a written demand.
2. Send a legal notice if there is no response
A short notice from a lawyer, giving the calculation and a date to pay, often gets the payment released. It also records the delay for interest. Our note on legal notices in Bengaluru explains what a good notice contains.
3. File a claim before the gratuity authority
If the employer still does not pay, you apply to the government authority for gratuity disputes. Under the old Act this was the Controlling Authority, an officer of the Karnataka Labour Department, and the application was Form N. Under the new Code it is called the competent authority.
The authority sends notice to the employer, hears both sides, decides the amount and directs payment with interest. If the employer still does not pay, the law allows the amount to be recovered in the same way as arrears of land revenue, through the district administration.
For claims arising from exits before 21 November 2025, the old Act’s procedure may still apply. For exits after that date, the new Code applies. Ask at the labour office which form and which officer handle your case before you file.
4. Appeal
Either side can appeal the authority’s order to the appellate authority. Under the old Act, an employer had to deposit the amount ordered before its appeal was heard, and the new Code keeps an appeal route with a time limit.
Gratuity, the labour court and other dues
People often search for the “labour court” for gratuity. Gratuity claims do not start in the labour court. They go to the gratuity authority described above. The labour court (now the Industrial Tribunal under the new Industrial Relations Code) deals with disputes about termination and other industrial disputes.
If your employer has also held back salary, bonus or full and final settlement, see our guide on salary not paid or wrongful termination. These claims can be pursued together, but they go to different authorities.
Questions people ask
Is gratuity paid if I resign before five years?
Not usually, unless you were a fixed-term employee (who now qualifies after one year) or the employment ended by death or disablement. Four years and 240 days of service is often treated as five years.
What is the maximum gratuity amount in 2026?
The statutory ceiling for private sector employees is ₹20 lakh. Your employer can pay more under its own policy.
How many days does the employer have to pay gratuity?
Thirty days from when it becomes payable. After that, it owes simple interest on the delayed amount.
Can my employer forfeit gratuity?
Only in limited cases set out in the law, such as termination for causing damage to the employer’s property or for certain serious misconduct. Even then, the forfeiture must be done properly. A general complaint about your work is not enough.
Where do I file a gratuity complaint in Bengaluru?
With the gratuity authority under the Karnataka Labour Department. Since the new Code’s state rules were still being settled, confirm the exact office and form with the labour department before filing.
Talk to us about your matter
Call or WhatsApp to fix a time. Bring your papers to the office in Rajarajeshwari Nagar.
This article is general information about the law as it stood when it was written. Your facts change the answer. Speak to an advocate before you act on it.