A worked example: ₹1,00,000 last drawn, 25 years of service
A central government employee retiring with ₹1,00,000 as last drawn basic pay plus DA, after 25 years of qualifying service, receives a retirement gratuity of ₹12,50,000 — well under the statutory ceiling.
The formula: 1/4 × (Basic+DA) × six-monthly periods
25 years of service is 50 completed six-monthly periods (25 × 2). Each period contributes a quarter of the last-drawn Basic+DA: ₹1,00,000 ÷ 4 × 50 = ₹12,50,000 — a formula that rewards more completed service periods proportionally.
Hitting the cap: ₹1,50,000 last drawn, 33 years of service
A higher earner with ₹1,50,000 last drawn and the maximum 33 years of qualifying service (66 six-monthly periods) would raw-calculate to ₹24,75,000 — but the statutory ceiling of ₹20,00,000 caps the actual gratuity at exactly ₹20,00,000 instead.
The two caps working together
Qualifying service itself is capped at 33 years (66 periods) for gratuity purposes — any service beyond that doesn't add further six-monthly periods. On top of that, the rupee result is separately capped at 16.5 times Basic+DA or the statutory ceiling, whichever is lower — two independent limits that can each bind depending on the numbers involved.
Why this differs from the private-sector formula
Government employees under CCS (Pension) Rules use this 1/4 × (Basic+DA) per-period formula; private-sector employees under the Payment of Gratuity Act instead use 15/26 × last drawn salary × years of service — a genuinely different rate and structure, not just different numbers plugged into the same formula.