Does the following hadith include the punishment in the grave or is it restricted to the punishment on the Day of Judgment?
“This Ummah (Islamic community) reminds of the Ummah that Allaah has placed His mercy upon. This Ummah will not have any punishment in the Hereafter, this punishment is in this world with Fitan (temptations, tribulations), trials, tribulations and punishments and difficulties, and earthquakes and killings, murder, and death, like this.” [Abu Daawood and Al-Hakim]
Assalaamu alaykum.

All perfect praise be to Allah, The Lord of the worlds. I testify that there is none worthy of worship except Allah and that Muhammad is His slave and Messenger.

It was reported in a hadeeth that the Prophet said, “This Ummah of mine is an Ummah that has been granted mercy; it will not have any reckoning or punishment in the Hereafter. Its punishment is in killings, earthquakes and Fitan (afflictions, trials, tribulations).” [Abu Daawood and Al-Haakim] Al-Haakim said, “The chain of narrators of this hadeeth is authentic; Al-Thahabi and Al-Albaani are of the same view.

The wording of Abu Daawood in his Sunan is as follows, “This Ummah of mine is an Ummah that has been granted mercy; it will have no punishment in the Hereafter. Its punishment is in this world, in Fitan (afflictions, trials, tribulations), earthquakes and killings.”

The scholars stated that what is meant by Ummah here is most of the Muslim nation as it is determined with absolute evidence that some of them will enter Hellfire to be purged.

It appears from the statements of the interpreters of Hadeeth that the punishment mentioned in the hadeeth is the punishment of the Day of Resurrection and not the torment of the grave.

Al-Munaawi said in Faydh Al-Qadeer, “‘It will have no punishment in the Hereafter’ means that those who will be punished amongst them will not feel the pain of the fire, because if they enter it, they will be made dead in it…”

This entrance will be on the Day of Resurrection. Al-Munaawi refers to the hadeeth of Abu Sa'eed, may Allah be pleased with him, who said:

“The Prophet said, ‘As for the people of Hell who are its people (i.e. its permanent residents), they will neither die nor live therein. But there are some people who will be punished with Fire because of their sins. He would cause them to die till they would be turned into charcoal. Then they would be granted intercession and would be brought in groups and would be spread on the rivers of Paradise and then it would be said: O inhabitants of Paradise, pour water over them; then they would sprout forth like the sprouting of seed in the silt carried by flood.” [Muslim]

Among the evidence that supports the view that what is negated is the punishment of the Hereafter is that Anas, may Allah be pleased with him, narrated that the Prophet said, “This nation has been granted mercy, and its torment (in this world) is at the hands of one another. When the Day of Resurrection comes, each Muslim man will be given a man from among the idolaters and it will be said, ‘This is your ransom from the Fire.’” [Ibn Maajah - Al-Albaani graded it saheeh (sound)]

There is another hadeeth as well that negates the punishment of the grave as well, which is reported by At-Tabarani, who relates that Anas, may Allah be pleased with him, narrated that the Prophet said, “This Ummah of mine is an Ummah that has been granted mercy. Its repentance is accepted, it will enter its graves with its sins and will come out of its graves without sins; its sins will be wiped out by the believers seeking forgiveness for them.” [At-Tabaraani]

However, the chain of narrators of this hadeeth is weak. It includes Ahmad ibn Taahir ibn Harmalah about whom Ad-Daaraqutni said, “He is a liar.” Ibn 'Adiyy said, “He is very weak, as he lies when he narrates a hadeeth from the Prophet and he lies when he reports from people. He mentioned some matters about him in his biography, and then he said, ‘He is a liar.’”

Allah knows best.