As per sec.4(1) of the Payment of Gratuity Act,1972, gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service of not less than five years due to (1) his superannuation or (2) his retirement or resignation or (3) his death or disablement due to accident or disease. However, the proviso to this sub-section takes away the condition of the 5 years of qualifying service in case of death or disablement.
Section 4-A of the P.G Act,1972 makes it compulsory for every employer to obtain an insurance policy for his liability towards the statutory gratuity from the Life Insurance Corporation of India. Section 4-A(5) enjoins the entire obligation of payment of gratuity under the Act on the employer in case of his failure to do so or default in the payment of premium if any to the L.I.C of India.
Therefore, the amount of gratuity payable to a deceased employee at the age of 35 with just 2 years of service depends on the type of Insurance policy taken by the concerned employer only. If it is a policy of Group Gratuity cum Life Assurance Scheme, his nominee would get an amount of gratuity equal to the no of years of service that would likely to have been completed upto the age of superannuation agreed in the policy. Otherwise, the amount of gratuity would be proportionate to the actual length of service prior to the date of death of the employee.
Better check with the employer and the LIC as well.