7th Pay Commission Recommendations pension and Related Benefits Enhancement in the Gratuity Ceiling and its Indexation
10.1.34 A number of representations have been received by the Commission stating that there is a need to revise the existing ceiling of ₹10.00 lakh with regard to payment of service gratuity.
Analysis and Recommendations
10.1.35 Rule 49 and 50 of the CCS (Pension) Rules provides that a government servant is entitled to get retirement gratuity equal to one-fourth of his emoluments for each completed six monthly period of qualifying service subject to a maximum of 16.5 times of the last emoluments subject to a maximum of ₹10 lakh.
10.1.36 The Commission sought the views of the government in this regard. The Department of Pension and Pensioners Welfare stated that the VI CPC has increased the amount of gratuity from ₹3.5 lakh to ₹10 lakh w.e.f. 01.01.2006. This amount, in the view of the department, is not commensurate with emoluments that are available to senior officers at the time of retirement. The department has suggested to the Commission that a view could be taken to index gratuity with amount of DA admissible at the time of retirement.
10.1.37 The Commission notes that there is merit in the argument advanced to index the ceiling on gratuity so that the benefits of the enhanced ceiling are available to personnel in a manner which is more even over a time frame. The Commission recommends enhancement in the ceiling of gratuity from the existing ₹10 lakh to ₹20 lakh from 01.01.2016. The Commission further recommends, as has been done in the case of allowances that are partially indexed to Dearness Allowance, the ceiling on gratuity may increase by 25 percent whenever DA rises by 50 percent.
Source:http://7cpc.india.gov.in/pdf/sevencpcreport.pdf