After increasing the Dearness Allowance (DA) by 4% on March 7, this year, the government has decided to raise the gratuity limit of central govt employees by 25%, effective from January 1, 2024. With this raise, the gratuity limit has increased from ₹20 lakh to ₹25 lakh.
“As per the Government’s decisions in the implementation of the recommendations of the Seventh CPC, the maximum limit of Retirement Gratuity and Death Gratuity under the Central Civil Services (Pension) Rules, 2021 or the Central Civil Services (Payment of Gratuity under National Pension System) Rules, 2021, would be increased by 25% i.e. from ₹20.00 Lakh to ₹25.00 Lakh, with effect from 1″ January 2024,” Ministry of Personnel, Public Grievances & Pensions Department of Pension & Pensioners’ Welfare said in an Office Memorandum.
The decision to increase the gratuity limit was originally made in April this year, but a circular on May 7 stayed it.
What is Gratuity?
Gratuity refers to the amount that an employer pays his employee in return for services offered by him to the company. However, only those employees who have been employed by the company for five years or more are given the gratuity amount. It is given in addition to salary, pension and Provident Fund (PF). The Gratuity is governed by the Payment of Gratuity Act, 1972.
Earlier in March, the Modi government approved the release of an additional installment of Dearness Allowance (DA) to Central Government employees and Dearness Relief (DR) to pensioners.
The new rate, effective January 1, 2024, represents an increase of 4% over the existing rate of 46% of the Basic Pay/Pension. The hike in the Dearness Allowance and Dearness Relief compensated for the price rise.
The government said that the hike will cost ₹12,868.72 crore per annum to the state exchequer and will benefit 49.18 lakh Central Government employees and 67.95 lakh pensioners across the country.
With the current Dearness Allowance reaching 50%, both the house rent allowance (HRA) and the upper limit for gratuity will experience an increment. The previous Dearness Allowance hike came in October 2023, when it was raised by 4% from 42% to 46%. The government said that the hikes are according to the recommendations of the 7th Central Pay Commission.
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Published: 01 Jun 2024, 04:10 PM IST