Dearness Allowance hiked to 50%: Higher retirement and death gratuity, HRA, other allowances revised; check details

Dearness Allowance hiked to 50%: Higher retirement and death gratuity, HRA, other allowances revised; check details

7th Pay Commission DA hike: In a welcome move for millions of central government employees and pensioners, the government announced a 4% increase in the dearness allowance (DA) and dearness relief (DR), raising the DA rate to 50% in March 2024. This increase came as a major relief for millions of central government employees and pensioners.

DA hike: Rent allowance and gratuity changes

As a result of the DA hike to 50%, the government also adjusted the rent allowance (HRA) for central government employees in X, Y, and Z category cities. As per an ET report, the Central government has also increased the tax-free limit for gratuities from Rs 20 lakh to Rs 25 lakh for central government employees.

Another benefit that will increase is retirement and death gratuities. According to an Office Order from the Ministry of Labour and Employment dated April 30, 2024, the limit for these gratuities rises by 25% whenever the dearness allowance reaches 50% of the basic pay. Because the DA was increased to 50%, the maximum limit for retirement and death gratuities has been raised from Rs 20 lakh to Rs 25 lakh, effective January 1, 2024.

Understanding Gratuity

Gratuity is a benefit that an employer provides to an employee for working continuously for at least five years.

Under the Payment of Gratuity Act, 1972, an employee is eligible for gratuity if they’ve worked for five or more continuous years with the same organization. Gratuity is paid when the employee:

a) Retires, or

b) Resigns

However, there is an exception: the five-year requirement does not apply in cases like death or disability.

DA Hike: Other allowances adjusted

Some allowances, like the Children’s Education Allowance (CEA) and the Hostel Subsidy, automatically increased by up to 25% after the dearness allowance (DA) rose to 50% for central government employees and retirees earlier this year.

An Office Memorandum from the Ministry of Personnel, Public Grievances, and Pension, dated April 25, 2024, explained that questions had been raised about the updated amounts for the Children’s Education Allowance and the Hostel Subsidy following the DA increase to 50%, which took effect on January 1, 2024. This increase was officially announced in a memorandum from the Ministry of Finance, dated March 12, 2024.

The new limits for Children’s Education Allowance (CEA) and Hostel Subsidy are as follows:

Reimbursement of Children’s Education Allowance

Government employees can claim a fixed monthly reimbursement of Rs 2,812.5 for Children’s Education Allowance and Rs 8,437.5 for Hostel Subsidy, regardless of their actual spending.

Divyang childrenGovernment employees with Divyang (disabled) children will receive double the regular amount, which is Rs 5,625 per month, regardless of their actual costs.

Special allowance for child careThe monthly rate for the Special Allowance for Child Care for women with disabilities has been changed to Rs 3,750, depending on certain conditions.

These changes will take effect starting January 1, 2024.

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