Gratuity Under Award
Gratuity under Act
a) The death of the employee,
b) Employee becoming physically or mentally incapable of further
c) Termination of Service
d) Retirement on superannuation and
e) On voluntary retirement or resignation after 10 years of continuous
A) Retirement on superannuation
B) Resignation after 5 years of service
C) Death and
D) Disablement
Formula for calculation
One month pay for each completed years of service (max) 15 months pay + 1/2 month pay for each year beyond 30 years of service.

*Pay = Basic Pay + Special Pay + Officiating Pay + PQP+ increment component of FPP.
* Based on Average of the last 12 months.
* Service of more than 6 months will be taken as one year.
15 days wages X No of years of Service
 i/e., 15/26 X Wages X No of years of service.

*Wages = Basic Pay + DA + Spl. pay + PQP +Officiating Pay + increment component of FPP
*One day Wage = Monthly wage divided by 26
* Based on Last drawn Salary
* Service of more than 6 months will be taken as one year
Maximum Amount Payable
No ceiling
Max. Rs.10,00,000
Tax Exemption
Exemption up to Rs.10,00,000
Exemption up to Rs.10,00,000

Pension Scheme (Old) Highlights:
(to those who have joined before 01/04/2010)

1. Pension will be payable on retirement to permanent employees who have put in minimum of 10 years of service (on superannuation).
2. Pension is to be paid on 50% of the average of the pay drawn by an employee during the last 10 months of his service in the bank.
Here Pay refers to the Basic pay + Special Pay + PQP + Increment component of FPP (Basic Pension)
3. He is allowed to commute up to a maximum of 1/3 of his Pension and take a lump sum payment on the commutation value.
4. Dearness Relief is payable on Basic Pension. DA will be revised every half year according to rise and fall of Consumer Price Index.
5. Dearness Relief is payable on the full pension including the commuted value.
6. Completed service of 33 years will qualify for full pension. If the service is less than 33 years, proportionate pension shall be paid.
7. In case of an employee voluntarily retiring on completion of 20 years of actual service, his qualifying service shall be increased by a period not exceeding 5 years, so however, that the total qualifying service of such employee shall not in any case exceed thirty three years and also shall not take him beyond the date of superannuation.
8. For those employees who are retiring on superannuation, the notional service of 5 years shall not be added.
9. The commutation factor ( varies as per age) for a retiring employee who has completed 60 years will be 9.81.
10 Formula for calculating Commutation Value=
      1/3 of Basic Pension X 12 X Commutation factor.

If an employee gets a Pension of Rs.15000, he may commute a maximum of Rs.5000 and the commutation value will be =Rs.5000 x 12x 9.81= Rs. 5,88,600

Family Pension:  Payable after the death of Employee while in service or after retirement.

Scale of Pay per month
Amount of Monthly Family Pension
Upto Rs. 11,100
30% of the ‘pay’ subject to Minimum of Rs.2,785 per month
Rs. 11,101 to Rs.22,200
20% of the ‘pay’ subject to Minimum of Rs.3,422 per month
Above Rs. 22,200
15% of the ‘pay’ subject to Minimum of Rs.4,448 per month and Maximum of Rs.9,284

Details of National Pension Scheme(NPS)      (to those who have joined after 01/04/2010)
NPS (National Pension System) is a defined contribution based Pension Scheme launched by Government of India .
It is applicable to Bank Employees who joined Banking industry on or after 01.04.2010.
It is based on a unique Permanent Retirement Account Number (PRAN) which is allotted to each Subscriber upon joining NPS.
PFRDA has now launched a separate model to provide NPS to the employees of corporate entities, including PSUs (including Banks). This model is titled "NPS - Corporate Sector Model".
On successful registration, a PRAN (Permanent Retirement Account Number) will be allotted to the subscriber. A PRAN Kit containing PRAN card, Subscriber details (referred as Subscriber Master List) and an information booklet is sent to the subscriber's registered address. The T-Pin and I-Pin are sent separately to the registered address. In case of the Corporate Sector subscriber, the PRAN Kit alongwith T-PIN & I-PIN will either be sent to the subscriber's registered address or at the Corproate Head Office as per the option selected by the Corporate.
The PRAN Card is a document with PRAN, subscriber's name, father's name, photograph and signature/thumb impression.
NPS Account Information:
The NPS Scheme offers 2 types of account
  1. Tier I account – it is also known as Pension Account. Withdrawal from this account is restricted till the Subscriber attains the age 60 years. Minimum yearly contribution requirement in this account is Rs.6000.
  2. Tier II account – it is a normal investment account. Withdrawal from this account can be done as per the need of the Subscriber. Minimum yearly contribution requirement in this account is Rs.250 however on 31st March of each year total value of units in this account should be equal to or more than Rs.2000
An active Tier I account is mandatory for opening Tier II account. Tier II account can be opened along with Tier I account or at any time after Tier I account opening.
Fund options:
NPS gives Subscribers option to invest according to their choice and risk appetite among three funds. Three funds under NPS are
  1. Equity (Asset Class E)
  2. Corporate Bonds (Asset Class C)
  3. Government Securities (Asset Class G)
Subscriber can switch the asset allocation once in a financial year.
Investment Options:
Depending on the expertise on taking call on right asset mix, Subscribers have 2 investment options under NPS
  1. Active Choice – Under this option, subscriber can select the asset allocation among Equity, Corporate Bonds and Government Securities as per his / her choice.
  2. Auto Choice – Under this option, fraction of funds invested across three asset classes is determined by a pre – defined portfolio which will be based on the age of the Subscriber. This is also known as Life Cycle Fund option.

Tax Implication of NPS:

§  Employer's contribution to NPS on behalf of the employee is treated as perquisite in the hands of the employees, but is deductible u/s 80CCD (2) of the Income tax Act, 1961 to the extent of 10% of basic salary. This deduction is over and above the limit of Rs.1.5 lac u/s 80 CCD (1). This will lessen the tax burden of the employee to the extent of amount deductible u/s80CCD (2) of the Income tax Act, 1961.
§  Contribution by individual employee is eligible for a deduction from Income under Section 80CCD (1) of the Income Tax Act 1961 upto Rs 1.5 Lakhs. However, investments under Section 80C Section 80CCC and 80CCD(1) should not exceed Rs.1.5 lakhs per assessment year to claim for the deduction.
§  An additional exclusive tax benefit of Rs.50,000/- under section 80CCD (1B) per assessment year (applicable from F.Y 2015-16/A.Y 2016-17) for NPS investments.

Withdrawal from Tier I NPS account:
Amount from Tier I account can be withdrawn only on exit from NPS. Exit from NPS can be done at any point of time. The payout would be made to Subscriber as per below chart
Withdrawal before the age 60 years
 Up to 25% of Employee’s contribution can be withdrawn in lump sum.
Three times before 60 years of age
(but after 10 years of contribution)
for the purpose of
1. construction of House property,
2. marriage/education of children,
3. medical treatment.
(G.O. issued dated 11.05.2015)
Withdrawal on attaining the age 60 years
1.      Up to 60% of Corpus can be withdrawn in lump sum
2.      Minimum 40% of the Corpus needs to be invested in Annuity
Subscriber can opt for any of the following options to receive pension by way of purchasing annuity
Annuity Schemes:
After retirement ,Depending on the need, Subscriber can select any of the below mentioned annuity plan (i.e. monthly payment of a fixed amount or PENSION as commonly called) offered by Annuity Service Providers registered with PFRDA
  • Annuity payable for life at a uniform rate to the annuitant only
  • Annuity payable for 5, 10, 15 or 20 years certain and thereafter as long as you is alive
  • Annuity for life with return of purchase price on death of the annuitant (Policyholder)
  • Annuity payable for life increasing at a simple rate of 3% p.a
  • Annuity for life with a provision of 50% of the annuity payable to spouse during his/her lifetime on death of the annuitant.

Steps to be followed to check NPS Balance:

 First we have to visit website which is the official website of Central Record Keeping Agency and of National Securities Depository Limited.

You can get Balance, growth, statement of accounts etc., from the above website.
Every month you will be getting SMS about the amount credited to your NPS account.
However, if SOT (Statment of Transanction) is required in soft copy, the subscriber can give a request through CRA toll free number 1800-222-080 using TPIN.
SOT for last three financial years can be requested.
The SOT will be sent through email in the email id registered with CRA.
This is not a chargeable service.
Alternatively, by login to CRA system using IPIN, the subscriber can print his/her SOT (available for the last three years).

Past Performance of Pension Funds on Return %  as on 29.05.2015 as per NSDL site :

Scheme  E: Equity

3 Years

Since Inception

Scheme C: Corporate Bonds

3 Years

Since Inception
Scheme G: Government Securities

3 Years

Since Inception

Expected Modification:
1.The Union Cabinet recently passed a Bill that seeks to ask pension fund managers to offer minimum assured return options to investors. This will come into force only after Parliament passes the PFRDA Bill.
2.The most key concern is the lack of clarity on taxation at withdrawal. Present laws say the funds will be taxed at withdrawal.
Under the existing laws, up to 60 per cent corpus on maturity can be withdrawn while at least 40 per cent has to be used to buy annuity. At present, returns from annuity insurance plans are not tax-free.
The proposed Direct Taxes Code (DTC) seeks to exempt NPS funds from tax at withdrawal. However, it is not clear if the DTC provides for tax exemption on returns from annuity plans as well.
Those who want to know more, please visit

Difference between Old Pension Scheme and NPS

Old Pension Scheme
National Pension System
10% of Basic Pay by Employee to P.F. a/c.
Pension will be paid by employer.
10% of B.P+D.A by Employee
and Employer.

Contribution by Empl. Will be with Dept/Bank/EPF.
Both Employee &Employer
 Contribution will be with Fund Managers.
Charges will be deducted from contribution by POP,CRA,TRUSTEE BANK,CUSTODIAN,
Will be charged for each and every transaction and for annual maintenance of a/c, securities.
Empl. may raise loan on security of P.F balance, for various needs at any time and repay.
No Loan facility.
Can withdraw up to 75% on non refundable basis for ward’s marriage or to construct house after 25 yrs of service.
 1.Can withdraw 25% of employees contribution after minimum 10 years of service.
Purpose: Marriage of ward, Education expenses for ward, construction of House , Medical Expenses for selected deceases..
2.In case of VRS,etc., 80% of accumulated wealth will be used for pension/annuity. Only 20% will be given in cash.
Easily interact with his own employer /H.O
Has to interact through computer/Internet with NSDL/PFRDA/FUND MANAGER.
Difficult to analyze & choose Fund Manager as well as Type of scheme to invest.
Tax treatment
Employee’s contribution to P.F. a/c is under 80C.
P.F. accumulation, Pension, Commutation are fully exempted from Income Tax
Employers contribution is added to Income of the employee, but can be taken as investment apart from 1,50,000 limit under 80CCD(2).
On retirement 60% will be paid in cash and is taxable.
Tax amount will be huge.
Other 40% will utilised for Pension and is tax free.
Empl. Contribution with 8.5% interest and Pension related to Basic Pay with D.A is assured for life.
Both the contributions are invested in Shares/
Debentures/ Govt. Bond
No Guarantee on  return.
For Family
On the death of an empl., Family Pension is given to spouse throughout his/her life.
On the death of Empl. Wealth accumulated till date is given to the spouse, however small be it.. There ends all. No support for the spouse thereafter.