Sections 55-56 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.
Section 55 requires every employee with one year of service to make a gratuity nomination, and sets the rules for nominees. Section 56 tells the employer how to determine and pay gratuity: give notice, pay within thirty days, pay interest if late, deposit the admitted amount in a dispute, and face a competent authority and an appeal.
An employee who has completed one year of service must nominate (s.55(1)). If he has a family, the nominee must be a family member; a nomination in favour of a non-family person is void (s.55(3)). The employer, once gratuity becomes payable, must determine the amount and give written notice to the payee and the competent authority, whether or not an application was made, and pay within thirty days (s.56(2)-(3)). Late payment attracts simple interest at a rate not exceeding the rate notified for long-term deposits (s.56(4)). An appeal lies within sixty days (s.56(8)).
Section 55: nomination
| Sub-section | Rule |
|---|---|
| 55(1) | Each employee who has completed one year of service makes a nomination in the time, form and manner the appropriate Government prescribes |
| 55(2) | The amount may be distributed among more than one nominee |
| 55(3) | If the employee has a family when nominating, the nomination must be in favour of one or more family members; a nomination in favour of a non-member is void |
| 55(4) | If he has no family when nominating, he may nominate anyone; if he later acquires a family, the nomination forthwith becomes invalid and he must make a fresh nomination in favour of family members within the prescribed time |
| 55(5) | Nomination may be modified at any time on written intimation to the employer, subject to (3) and (4) |
| 55(6) | If a nominee predeceases the employee, the nominee's interest reverts to the employee, who must make a fresh nomination |
| 55(7) | Every nomination, fresh nomination or alteration goes to the employer, who keeps it in safe custody |
The Code's definition of "family" matters for (3) and (4); see our article on section 2 terms on dependant and family.
Rule 32 of the Central Rules, 2026
Rule 32 prescribes the procedure:
- The nomination is in Form III, in duplicate, delivered by personal service (with receipt), registered speed post or electronically.
- For an employee already in service for a year or more when the Rules began and not yet nominated, ordinarily within ninety days of the Rules' commencement; for others, ordinarily within ninety days of completing one year. A late nomination in Form III is still accepted, and is not invalid merely for lateness.
- Within thirty days of receipt, the employer verifies the service particulars against its records and returns the attested duplicate against receipt.
- The nominee's Aadhaar details are to be provided with the form.
- An employee with no family must submit a fresh nomination within ninety days of acquiring a family; a notice of modification, including after a nominee predeceases, also goes in Form III.
- The employee signs, or an illiterate employee gives a thumb impression before two competent witnesses who sign a declaration.
- The nomination takes effect from the date the employer receives it.
These are Central Rules. Where a State Government is the appropriate Government, the State's own rules apply. If you need help setting up a nomination register, our payroll compliance audit covers it.
Section 56: determination and payment
Application and employer's duty
Section 56(1) says a person eligible for gratuity, or someone authorised in writing, sends a written application to the employer within the time and in the form prescribed. But s.56(2) does not wait for that: as soon as gratuity becomes payable, the employer must, whether or not an application has been made, determine the amount and give written notice to the person to whom it is payable and to the competent authority, stating the amount.
Payment within thirty days and interest
| Step | Provision |
|---|---|
| Determine amount, notify payee and competent authority | s.56(2) |
| Pay within thirty days from the date gratuity becomes payable | s.56(3) |
| If late, pay simple interest from the date payable to the date paid, at a rate not exceeding the rate notified by the Central Government from time to time for repayment of long-term deposits | s.56(4) |
| No interest if the delay is due to the employee's fault and the employer obtained written permission from the competent authority for delayed payment | Proviso to s.56(4) |
The Code prints no interest rate; it is notified.
Rule 33: application, notice and payment
Rule 33 of the Central Rules, 2026 fills the procedure:
- Application in Form IV, ordinarily within thirty days of the gratuity becoming payable; an employee whose retirement date is known may apply before. A nominee applies ordinarily within thirty days; a legal heir ordinarily within one year. A late application is entertained on sufficient cause, and no claim is invalid merely for delay.
- Within fifteen days of receiving the application, the employer issues a Form V notice: either stating the amount and a payment date not later than the thirtieth day after receipt of the application, or giving reasons why the claim is not admissible, with a copy to the competent authority.
- Payment is by demand draft or credit to the bank account (rule 33(3)).
- A claimant may apply in Form VI to the competent authority within one hundred and eighty days if the employer refuses a nomination or application, issues a notice with a lower amount or denying eligibility, or fails to issue the notice in time.
- The competent authority issues notices in Form VII, decides within six months (extendable by up to three months for recorded reasons), and directs payment by Form VIII within thirty days.
- If the employer still does not pay, the claimant applies in Form IX for recovery under section 129 (rule 33(13)).
The earlier Indian practice names Form F for nominations; the Code-era Rules use Form III, so use the Rules' forms. For the old-law view see our post on gratuity nomination under the older Act as background only.
Disputes: s.56(5) to (7)
If there is a dispute about the amount, the admissibility of a claim or the person entitled, the employer must deposit with the competent authority the amount he admits to be payable. Either party can apply to the competent authority to decide. After due inquiry and a hearing, the authority determines the matter and directs payment, or payment of the balance after the amount already deposited. The authority has Code of Civil Procedure powers for attendance, documents, affidavits and commissions, and the inquiry is a judicial proceeding within the meaning of the Indian Penal Code sections the Code cites. From 1 July 2024 the Indian Penal Code was replaced by the Bharatiya Nyaya Sanhita (BNS); we give no new section numbers.
Appeal: s.56(8)-(9)
A person aggrieved may appeal to the appropriate Government or the authority it specifies within sixty days of receiving the order; a further sixty days may be allowed for sufficient cause. An employer's appeal is not admitted unless it produces the competent authority's certificate of the deposit, or deposits the amount with the appellate authority. The appellate body may confirm, modify or reverse. Rule 33(12) sets the appeal memorandum contents and a six-month disposal target, extendable by three months.
Example
An employee resigns on 10 March and gratuity becomes payable that day. The employer must compute it and give a written notice to him and the competent authority, even without an application, and pay by 9 April. If it pays on 25 April, it owes simple interest for the delay (at the notified rate), unless the delay was the employee's fault and the authority gave prior written permission. If the employer disputes eligibility, it deposits what it admits. To see how the amount is computed, read section 53.
Need help with gratuity notices and records?
Missing the thirty-day window or the notice to the competent authority is an avoidable cost. If you want your nomination records, exit process and notices tested against these sections, our payroll compliance audit team can help.
Key takeaways
- Nominate after one year of service; a family member must be the nominee where a family exists, else the nomination is void.
- Employer must determine and notify the amount even without an application, and pay within thirty days.
- Late payment: simple interest at a notified rate, unless the delay was the employee's fault and written permission was obtained.
- Disputes: employer deposits the admitted amount; the competent authority decides; appeal in sixty days.
- Rules 32 and 33: Form III nomination, Forms IV to IX for claim, notice, dispute, hearing, order and recovery.
Read next
- Section 54: Continuous service
- Sections 57 and 58: Compulsory insurance for gratuity and competent authority
- Appeal to the controlling authority in a gratuity dispute
- Gratuity compliance checklist for employers
Disclaimer: Based on the Code on Social Security, 2020 (as enacted) and, where noted, the Code on Social Security (Central) Rules, 2026 (G.S.R. 344(E), 8 May 2026), as on 30 September 2026. The Code is in force from 21 November 2025; some provisions may be notified later, and State Governments make their own rules for establishments where the State is the appropriate Government. Verify the current position before acting.