Gratuity Rules explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Chapters III to VI of the Code on Social Security (Lakshadweep) Rules, 2025 are the claim-handling chapters. They tell an island employer how long an employee has to nominate and apply for gratuity, what notice the employer must send and by when, how a maternity benefit complaint and an appeal run, what the employer deposits when a work injury is fatal, and how appeals reach the Employees Insurance Court.
The employer replies to a gratuity application within fifteen days by a notice in Form VIII, fixing a payment date not later than the thirtieth day after receiving it (rule 20(2)). A claimant can go to the competent authority within one hundred eighty days (rule 20(4)). On a fatal injury the employer deposits fifteen thousand rupees or such amount as the Government notifies towards funeral expenses (rule 24). Insurance Court appeals are filed within three years of the cause of action, with a fee of hundred rupees (rule 17).
The rule set
The rules are the Code on Social Security (Lakshadweep) Rules, 2025, as notified on 25 March 2026 (F.No.08/03/2024-LE&T/72, Lakshadweep Gazette Extraordinary of 30 March 2026). Later amendments and State notifications under these rules should be checked in the State Gazette. Rule 1(3) reads: "They shall come into force after the date of their final publication in the Official Gazette of Lakshadweep." The four Codes were brought into force from 21 November 2025. The Gazette copy prints some sub-rules twice; they are stated once here.
Our companion article on the Lakshadweep social security organisations, cess and vacancy rules covers the Boards, building cess, records and the date from which the Code applies to the specified islands. For an audit of how gratuity and compensation are actually processed in your payroll, our payroll compliance audit team can compare your practice with the steps below.
How the rules sit with the Central rules
The Central gratuity rules are in rules 31 and 32 and rule 33, with the forms in Forms IV to VI. Maternity benefit and creche are in rules 34 and 35 and rules 36 and 37. Compensation and the Insurance Court are in rules 57 to 59 and rules 29 and 30. The Lakshadweep numbering differs, so cite the Lakshadweep rule number.
Chapter IV: gratuity (rules 18 to 22)
| Step | Rule | Form | As printed |
|---|---|---|---|
| Gratuity of a minor nominee or heir | 18 | None | Competent authority invests it in a term deposit with a Nationalised Bank |
| Nomination | 19(1) | Form IV, in duplicate | Employee in service for a year or more at commencement: ordinarily within ninety days; employee completing one year after commencement: ordinarily within thirty days of completion |
| Employer verifies and returns duplicate | 19(2) | Form IV | Within thirty days of receipt |
| Fresh nomination on acquiring a family | 19(3) | Form V | Within ninety days of acquiring a family |
| Modification, including a predeceasing nominee | 19(4) | Form VI | In duplicate |
| Application by employee | 20(1)(i) | Form VII | Ordinarily within thirty days from the date gratuity became payable |
| Application by a legal heir | 20(1)(iii) | Form VII | Ordinarily within one year |
| Employer's notice on the claim | 20(2) | Form VIII | Within fifteen days of the application; payment date not later than the thirtieth day after receipt |
| Application to competent authority | 20(4) | Form IX | Within one hundred eighty days of the cause |
| Competent authority's disposal | 20(5) | Notice in Form X | Not exceeding ninety days from filing; up to three opportunities for non-appearance |
| Payment on the authority's direction | 20(11) | Form IX notice | Within thirty days of receipt of the notice by the employer |
| Appeal | 20(12) | Memorandum | Opposite party comments within fourteen days; disposal not exceeding ninety days |
| Recovery | 20(13) | Form XII | In duplicate, under section 129 of the Code |
A nomination accepted after the specified period is not invalid merely because it was late (rule 19(1) proviso). A nomination takes effect from the date the employer receives it (rule 19(6)). For an employee on fixed term employment, rule 20(1) provides that gratuity is payable if the employee renders service under the contract for one year, at the rate of fifteen days' wages, based on the rate last drawn, for every completed year of service or part thereof in excess of six months.
An application filed late is still entertained if sufficient cause is shown, and no claim is invalid merely because it is late (rule 20(1)(v)). The notice in Form VIII either specifies the amount payable and the payment date, or states the reasons why the claim is not admissible, in which case a copy goes to the competent authority. Gratuity is paid by demand draft or by credit to the bank account of the employee, nominee or legal heir, and the details of payment are intimated to the competent authority (rule 20(3)). A copy of Form VIII is also shared electronically with the designated authority and the Director General, Labour Bureau (rule 43).
Under rule 21, an employer of an establishment covered by the Code registers it electronically or otherwise in Form XIII within thirty days from the date of notification of the compulsory insurance under section 57(1); the Board of Trustees includes equal numbers of employer and employee representatives. The competent authority is appointed by notification (rule 22).
Chapter V: maternity benefit (rule 23)
A complaint under section 72(1) is made in writing in Form XIV. The Inspector-cum-Facilitator examines the employer's records and persons employed, and if satisfied that the maternity benefit has been improperly withheld, directs the employer to pay immediately or within a specified period. The time limit for disposal of a complaint does not exceed ninety days from filing, with up to three opportunities where a party does not appear. An appeal against the Inspector-cum-Facilitator's decision lies to the competent authority in Form XV, and the authority decides within ninety days of filing. The authority for appeal is appointed by the Administration by notification. The rules do not print any benefit period or amount; the Code applies.
Chapter VI: employee's compensation (rules 24 to 33)
- Funeral expenses (rule 24). If an injury results in death, the employer, in addition to compensation, deposits with the competent authority fifteen thousand rupees or such amount as the Government notifies through the Gazette, for the eldest surviving dependent or, where there is none or the dependent did not live with the employee, the person who incurred the expenditure. The rule prints no deposit deadline.
- Review without a medical certificate (rule 25). Allowed in five cases: the employee's wages have increased (employer), have diminished (employee), the employer has stopped paying with no change in the employee's condition, fraud or undue influence in the determination, or a mistake apparent on the face of the record.
- Notice book (rule 26). Every employer to which the Code applies maintains a notice book under section 82(4) in Form XVI.
- Medical examination (rule 27). An employee on half-monthly payment need not be examined elsewhere than the place of residence more than twice in the first month after the accident or more than once in any later month.
- Fatal accident statement (rule 28). In Form XVII.
- Memorandum of agreement (rule 29). Sent to the competent authority in duplicate, in Form XVIII, XVIII A or XVIII B; the authority issues a notice in Form XIX fixing a hearing, and a recorded memorandum is entered in the register in Form XX.
- Applications (rule 31 and 32). An application is made in Form XXI; the competent authority disposes of it within six months from receipt. Certified copies cost rupees hundred per copy, and the authority may exempt an applicant unable to pay costs.
- Evidence (rule 33). Evidence may be on affidavit, subject to cross-examination, and a witness may be summoned on deposit of fees and expenses.
The competent authority for the Chapter is appointed by the Administration by notification under section 91(1) (rule 30).
Chapter III: the Employees Insurance Court (rules 16 and 17)
The Insured Person or the Corporation may file a second appeal to the Court within ninety days from the date of receipt of the order of the Medical Appeal Tribunal, in Form I, with a power to admit a late appeal on sufficient reasons (rule 16). An appeal under section 49 is presented in triplicate in Form II with the particulars the rule lists, verified like a civil pleading, with an accurate list of documents, and entered in the Court's register in Form III. Every appeal is filed within three years of the cause of action (rule 17(2)), and the Court follows the Code of Civil Procedure, 1908 on summons, hearing, issues and evidence. The fee on a section 49 appeal is hundred rupees, collected by Court fee stamps (rule 17(3)).
A worked example
A lodge in Bangaram gets a gratuity application from a retiring cook on a Monday. Within fifteen days the owner verifies the claim and sends a Form VIII notice stating the amount and a payment date not later than the thirtieth day after receipt, pays by demand draft or bank credit, and tells the competent authority of the area about the payment. Had the claim been refused, the notice would state the reasons and a copy would go to the competent authority; the cook could then apply in Form IX within one hundred eighty days.
Common lapses
- Not issuing the Form VIII notice in time, which itself gives the claimant a ground to approach the competent authority.
- Treating a late nomination or a late claim as invalid.
- Not depositing the funeral sum with the competent authority on a fatal injury.
- Not keeping the notice book in Form XVI.
Need help with gratuity and compensation processing in Lakshadweep?
If your gratuity notices, nominations and compensation deposits need to be checked against these chapters, our payroll compliance audit service can review the records and the timelines and note the gaps.
Key takeaways
- Gratuity nomination in Form IV; application in Form VII; employer's notice in Form VIII within fifteen days.
- Claimant may apply to the competent authority within one hundred eighty days in Form IX.
- Maternity complaint in Form XIV, appeal in Form XV; disposal within ninety days.
- On a fatal injury, deposit fifteen thousand rupees or the amount the Government notifies.
- Employees Insurance Court appeals within three years; fee hundred rupees.
Read next
- Code on Social Security (Lakshadweep) Rules, 2025: organisations, cess, records and vacancy reporting
- Occupational Safety, Health and Working Conditions (Lakshadweep) Rules, 2025: registration, duties, hours and registers
- Rule 33 of the Central Social Security rules: application for gratuity and appeal
- State rules under the four Labour Codes: which States have notified final rules
Disclaimer: Based on the State or Union territory rules named above, as notified under the Labour Codes and consulted on 4 October 2026. Later amendments, State notifications, fees and forms should be checked in the State Gazette and on the State labour department website. This article is general information, not legal advice; check the official text before acting.