SECTION 1. Section two of Republic Act Numbered Three hundred and forty is hereby amended to read as follows:
"SEC. 2. When an officer or enlisted man is retired under the provisions of Section one above, he shall, at his option, receive a gratuity equivalent to one month of his base and longevity pay on the date of retirement for every year of service such gratuity to be payable in one lump sum, or an annual retirement pay equivalent to two and a half per cent of the annual base and longevity pay received by him on the date of retirement for each year's active service rendered but not exceeding seventy-five per cent of the total base and longevity pay received by him on the date of retirement: Provided, however, That such retirement pay shall be subject to adjustment based on the prevailing scale of base pay of officers and enlisted men in the active service, such retirement pay to be payable in equal monthly installments: Provided, further, That this rate of retirement pay shall not be applicable to officers or enlisted men separated from the service through the action of classification or efficiency boards and courts martial, or as a result of their own misconduct or resignation except as provided in Section eight (d) of this Act. Nothing in the section shall be construed as authorizing payment of any differential in retirement pay to retired officers and enlisted men as a result of any increases in the scale of salary of officers and enlisted men in the active service prior to the approval of this Act."