PF and gratuity explained: what you get and when
PF and gratuity explained in brief: provident fund (PF) is a retirement saving to which both you and your employer contribute from your pay. Gratuity is a lump sum an employer pays on leaving after a qualifying period of service. Both affect your CTC and take-home pay. Know your UAN, check contributions and keep a record of service.
At a glance
- PF is a monthly deduction (employee share) plus an employer contribution; the rate is set by rules, commonly 12 percent of the PF wage.
- Your UAN stays with you across employers.
- Gratuity is usually payable after five years of continuous service, with exceptions such as death or disability.
- Check current limits, ceilings and the labour code changes on official sites.
- Both are part of CTC. See CTC versus in-hand.
How PF works
| Item | Detail |
|---|---|
| Employee share | Deducted from salary each month |
| Employer share | Paid by the employer, counted in CTC |
| UAN | Universal Account Number, one for life. See UAN |
| Passbook | View contributions on the EPFO member portal |
| Transfer | Link your UAN to move PF to the new employer's account |
| Withdrawal | Allowed in defined cases under EPFO rules |
Check the EPFO portal for current withdrawal and transfer rules, and for your contribution history.
How gratuity works
Gratuity is paid as a lump sum under the Payment of Gratuity Act, 1972 for covered establishments. The commonly used formula is:
Gratuity = last drawn monthly basic (plus dearness allowance) x 15 / 26 x completed years of service.
Worked example (illustrative): if the last drawn monthly basic is Rs 50,000 and you complete 8 years, the amount is 50,000 x 15 / 26 x 8, about Rs 2,30,769. A statutory upper limit applies; check the current limit at labour.gov.in. Employers may also have a more generous policy.
Who is eligible?
- Generally after five years of continuous service with the employer.
- Different rules apply on death or disability.
- Fixed-term and contract employees may be treated differently under newer labour rules; check current notifications.
Practical checklist when you resign
- Confirm your UAN is active and your KYC is complete.
- Ask HR for the PF exit date and gratuity statement.
- Transfer PF to your new employer rather than withdrawing, if you wish to keep saving.
- Keep payslips and the F&F statement. See relieving letter request.
- Check tax implications with a qualified adviser.
Frequently asked questions
Will leaving before five years forfeit gratuity? Generally yes, unless an exception applies or your employer's policy gives it earlier.
Is employer PF part of my CTC? Usually yes, so it is not part of in-hand pay. See in-hand salary.
Where do I check my PF balance? On the EPFO member portal using your UAN.
Next step
Log in to the EPFO portal and check your passbook, then read your appointment letter's gratuity clause.
This is general information, not legal, tax or immigration advice. Rules change and your situation may differ. Consult a licensed attorney or qualified adviser.