Is gratuity payable if an employee is terminated for misconduct?

Gratuity can be forfeited where an employee is dismissed for specific serious misconduct, but only within the narrow grounds of Section 4(6) of the Payment of Gratuity Act — namely termination for an act of violence, riotous or disorderly conduct, or an offence involving moral turpitude committed in the course of employment. Where the misconduct caused financial loss, forfeiture is limited to the extent of that loss.

Outside these grounds, gratuity cannot be withheld. Indian courts construe the forfeiture provision strictly and have overturned employer-imposed forfeitures for ordinary performance issues or minor policy breaches that do not meet the statutory threshold. A simple resignation after five years cannot be used as a basis to deny gratuity. Given the litigation risk, employers should take legal advice before initiating any forfeiture.