Here're Increases in Allowances For Govt Employees After 7th Pay Commission Revision

The seventh pay commission revision that increased dearness allowance by 4 per cent to 50 per cent has led to huge revisions in other allowances, including gratuity, HRA etc.
Here're Increases in Allowances For Govt Employees
Here're Increases in Allowances For Govt Employees

The Central Government recently announced a hike in dearness allowance (DA) and dearness relief for government employees by 4 per cent to take it from 46 per cent to 50 per cent, a move that triggered a huge revision in various other allowances, including much-anticipated gratuity component.

Dearness Allowance

Dearness Allowance (DA) serves as a critical component in the salary package of Central government employees, a cushion against the effect of inflation on their finances. Calculated as a percentage of the basic salary, the Dearness allowance is fully taxable. For instance, if your monthly basic salary stands at Rs. 50,000 and you are eligible for DA at 50 per cent of your basic pay, you would receive Rs. 25,000 as DA each month.


When the recent hike in DA made it touch the 50 per cent threshold, there will be an automatic revision in the gratuity limits. There were speculations that the DA would be merged with Basic Pay as it reached 50 per cent, but the government has denied such a proposal. Previously gratuity was capped at Rs. 20 lakhs (16½ times the Basic Pay plus DA) for qualifying service of 33 years or more, the ceiling for gratuity has now been raised by 25 per cent or Rs. 5 lakhs, amounting to a maximum of Rs. 25 lakhs. The revisions are applicable with effect from January 1, 2024.

Gratuity is a lump sum payment provided to central government employees upon completing at least five years of service. The gratuity amount received by an employee when they retire, superannuate or are terminated, is fully exempt from taxation. Generally, an employee must have served in the organisation for a minimum of five years to qualify, except in cases involving disability or death. The gratuity amount payable to government employees is tax-exempt, regardless of whether they work for the central or state government, local bodies or other government sectors.

Other Revisions

Several other allowances have also seen notable increases such as House Rent Allowance (HRA), Children's Education Allowance (CEA), Hostel Subsidy, and Special Allowance for Childcare. House Rent Allowance (HRA) is a component to help employees residing in rented accommodations. The hike in rent allowance (HRA) was announced for central government employees living in cities in the X, Y, and Z categories.

Revisions in Children's Education Allowance (CEA) and the Hostel Subsidy were made automatically after the dearness allowance (DA) hike to 50 per cent. The government employees will receive a fixed monthly reimbursement of Rs 2812.5 for Children's Education Allowance and Rs 8437.5 for Hostel Subsidy. For children with disabilities (Divyang children), an amount of Rs. 5,625 per month will be doubled, regardless of their actual expenses. The Special Allowance for Child Care rates for women with disabilities has been amended to Rs. 3750 per month, subject to certain conditions.

Transportation of Personal Effects, Dress Mileage Allowance for Own Transport, and Daily Allowance also saw hikes.

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