7th Pay Commission Big Update: Gratuity Limit Jumped by Rs 5 Lakh After Centre Hiked DA to 50 Percent

The retirement gratuity payable for qualifying service of 33 years or more was 16½ times the Basic Pay plus DA, subject to a maximum of Rs 20 lakh earlier

7th Pay Commission News: The Modi government’s decision to raise the dearness allowance for government employees by 4 percent to 50 percent has culminated in a massive revision in other allowances. This includes the retirement gratuity, as well. It is important to note that the gratuity limit and other allowances get automatically revised whenever the DA touches 50 percent as per the rules.

In March, the government had hiked the DA for over 50 lakh employees by 4% to 50%. It was also speculated that following this revision, the DA would be merged with Basic Pay since it has reached 50%. According to the reports, the government has denied any such proposal for now.

“As per para 6.2 of the OM no. 38/3712016-P&PW(A)(1) dated 04.08.2016 issued by Department of Pension and Pensioners’ Welfare, Ministry of Personnel, Public Grievances and Pensions, Government of India, the maximum limit of retirement gratuity and death gratuity shall be increased by 25% whenever the dearness allowance rises by 50% of the basic pay,” said a notice from the Ministry of Labour and Employment, Govt of India, issued on April 30, 2024

Accordingly, the maximum limit of retirement gratuity and death gratuity shall be increased by 25% to Rs 25 lakh from the existing Rs 20 lakh on account of the revision of dearness allowance payable to central government employees to 50% of the basic pay, it said.

7th Pay Commission: Here are some of the key details

• The retirement gratuity payable for qualifying service of 33 years or more was 16½ times the Basic Pay plus DA, subject to a maximum of Rs 20 lakh earlier
• With DA hike touching 50%, this limit in gratuity payable has been enhanced by 25% or Rs 5 lakh to Rs 25 lakh.
• The gratuity amount payable to government employees is exempt from income tax. Not only for central government employees, but the gratuity amount payable to state government staff, local body employees and other government sector workers is tax-free.
• After the revision in allowances by 25% after March DA hike, HRA, Child Education Allowance, Special Allowance for Childcare, Hostel Subsidy, Transportation of Personal Effects, Dress Allowance, Mileage Allowance for Own Transport, and Daily Allowance have also been increased.