If you have completed five or more years of continuous service, you are entitled to gratuity whether you retire or resign, but resigning can forfeit your pension. The Supreme Court drew this exact line in December 2025, and the table below shows what each choice costs and keeps.
| After 5+ years of service | If you RESIGN | If you RETIRE |
|---|---|---|
| Gratuity (Payment of Gratuity Act 1972) | Yes | Yes |
| Pension (under applicable pension rules) | No | Yes |
| Past service counted for pension | Forfeited | Counted |
| Right under a central statute | Yes, Section 4 | Yes, Section 4 |
The single most important point: gratuity is a statutory right that survives resignation, while pension depends on how the pension rules treat the way you left service.
In Ashok Kumar Dabas (Dead) Through Legal Heirs v. Delhi Transport Corporation, neutral citation 2025 INSC 1404, decided on 9 December 2025, the Supreme Court separated two benefits that people often confuse.
The Court held that an employee who has rendered not less than five years of continuous service is entitled to gratuity under Section 4 of the Payment of Gratuity Act, 1972, whether the employment ends by retirement or by resignation. That entitlement flows from the statute itself and does not depend on the manner of leaving.
On pension, the Court reached the opposite result. It held that under the applicable pension rules, a voluntary resignation forfeits past qualifying service for pension purposes. The length of service, even if it ran into decades, became irrelevant for pension once the resignation was accepted. The Court declined to recharacterise a plain resignation as voluntary retirement, because that would blur a distinction the rules deliberately keep.
So one act of resigning produced two opposite outcomes in the same case: gratuity preserved, pension lost.
Gratuity is governed by the Payment of Gratuity Act, 1972, and the key gate is Section 4(1): gratuity is payable on the termination of employment of an employee who has rendered continuous service for not less than five years.
The five-year continuous-service condition is met when employment ends by:
The five-year rule does not apply where the employment ends due to death or disablement caused by accident or disease. In those cases gratuity is payable even if the employee had served less than five years, and on death it is paid to the nominee or legal heirs.
The Act applies to factories, mines, oilfields, plantations, ports, railways, shops and establishments employing ten or more persons, so most private-sector and public-undertaking employees are covered.
If your employer does not pay gratuity on its own, you do not have to wait silently. The process is set out in Section 7 of the Payment of Gratuity Act, 1972.
If a public authority is sitting on your gratuity papers, you can also use the RTI Act to ask for the status of your file, the sanction note, and the reason for delay.
Pension and gratuity are paid under different rule-books, and that is why one event can split them.
Gratuity is a defined statutory benefit under a central Act. The moment you cross five years of continuous service, Section 4 fixes your right, and the way you leave does not erase it.
Pension is governed by the service or pension rules that apply to your post. Under those rules, voluntary resignation generally forfeits past qualifying service, because resignation is treated as a clean break from service rather than a continuation of it. Voluntary retirement is treated differently and protects the years already served. The Supreme Court in 2025 refused to let a resignation be relabelled as retirement to escape this consequence.
The practical lesson before you walk out: check whether your exit will be recorded as resignation or as voluntary retirement, because the word on your file decides whether decades of service count toward pension.
Dr. Shrawan Kumar Pathak worked in a transport undertaking in Indore district for 26 years. In March 2025 he submitted a letter of resignation to take up a private offer, and the management accepted it.
When his dues were settled, he was paid his gratuity under Section 4 of the Payment of Gratuity Act, 1972, because he had far more than five years of continuous service. But his pension claim was rejected: under the applicable pension rules his resignation forfeited his past qualifying service, so the 26 years did not count for a pension.
Had his exit been processed as voluntary retirement instead of resignation, the same 26 years would have counted toward pension. The gratuity was safe either way; only the pension turned on the label.
If a government employer is delaying your gratuity or has rejected your pension without a clear reason, you can file an RTI request:
To, The Public Information Officer [Name of department or undertaking] Subject: Information under the Right to Information Act, 2005 Under Section 6(1) of the RTI Act, 2005, please provide: 1. The current status of my gratuity claim, application dated ______. 2. A copy of the notice determining my gratuity amount under Section 7 of the Payment of Gratuity Act, 1972. 3. The reason recorded for any delay beyond 30 days in payment. 4. A copy of the order and the rule under which my pension claim was decided. I am ready to pay the prescribed fee under Section 7(1). If part of the information is held by another authority, please transfer that part under Section 6(3). If any information is denied, please give reasons under Section 7(1) and the appeal details under Section 19(1). Name: Address: Date:
You can draft this in minutes with the AI RTI Drafter.
Yes. Section 4 of the Payment of Gratuity Act, 1972 makes gratuity payable after five years of continuous service whether you retire or resign. The Supreme Court confirmed this in Ashok Kumar Dabas v. DTC, 2025 INSC 1404.
Because the two benefits follow different rules. Gratuity is a statutory right under a central Act, while pension follows your service or pension rules, under which a voluntary resignation usually forfeits past qualifying service.
Gratuity is payable only after you complete at least five years of continuous service. The five-year condition is waived where employment ends due to death or disablement by accident or disease.
Under Section 7 of the Act, the employer must pay gratuity within 30 days from the date it becomes payable. Delay beyond that attracts simple interest for the delayed period.
Apply in writing using Form I, and if the employer still refuses or disputes the amount, take the matter to the controlling authority appointed under the Payment of Gratuity Act, 1972, who can direct payment.
Yes. Resignation and voluntary retirement are treated differently. The Supreme Court in 2025 refused to treat a resignation as voluntary retirement, so the resigning employee lost pension while keeping gratuity.
No. It confirms the existing position that gratuity survives resignation. What it clarifies is that the same resignation can still forfeit your pension under the pension rules.