The Central government increased the dearness allowance (DA) and dearness relief (DR) by 4% in March 2024. This was a major relief for millions of central government employees and pensioners.
Due to this hike in DA to 50%, various components of a central government employee’s salary also increased.
For instance, the government also hiked the rent allowance (HRA) for central government employees living in cities in the X, Y, and Z categories.
Additionally, the Centre has raised the tax exemption ceiling on gratuities for central government employees from Rs 20 lakh to Rs 25 lakh.
Another component that will increase is retirement and death gratuities. According to the Office Order dated Ministry of Labour and Employment, Govt of India dated April 30, 2024, “As per para 6.2 of the OM no. 38/3712016-P&PW(A)(1) dated 04.08.2016 issued by Deartment 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. Accordingly, the maximum limit of Retirement gratuity and death gratuity shall be increased by 25% to Rs. 25 Lakh from existing Rs 20 Lakh on account of revision of Dearness Allowance payable to Central Government Employees to 50% of the basic pay w.e.f 1.01.2024, subject to other conditions mentioned in the DoP&PWOM dated 04.08.2016.” What is gratuity?
Gratuity is a defined benefit plan given by the employer to the employee for rendering services continuously for five years or more.
According to the Payment of Gratuity Act, 1972, an employee can receive gratuity if he has rendered continuous service for at least five years with an organisation. This gratuity is payable to the employee:
a) On his superannuation, or
b) On his retirement or resignation
However, there is an exception where the condition of working continuously for five years with an organisation is not applicable.
Also read: 6 things central government employees should know about latest dearness allowance increase
Allowances that have increased after latest DA hike
Certain allowances, such as the Children’s Education Allowance (CEA) and the Hostel Subsidy, automatically received revisions of up to 25% following the dearness allowance (DA) hike to 50% for its employees and retirees early this year.
According to an Office Memorandum (OM) released by the Ministry of Personnel, Public Grievances and Pension Department of Personnel & Training dated April 25, 2024, “References are being received from various quarters with regard to the amount of Children Education Allowance (CEA) and Hostel Subsidy admissible consequent upon enhancement of Dearness Allowance payable to Central Government employees @ 50% w.e.f. 1s1January, 2024 announced vide Ministry of Finance, Department of Expenditure O.M. No.1/1/2024-E-II (B) dated 12th March, 2024.
The following shall be the revised limits for CEA and Hostel Subsidy:
- Reimbursement of Children’s Education Allowance
Government employees will receive a predetermined monthly reimbursement of 2812.5/—for Children’s Education Allowance and 8437.5/—for Hostel Subsidy, regardless of actual expenditures. Government personnel with Divyang children will receive double the standard amount of 5625/—per month (fixed), regardless of their actual expenditures.
- Special Allowance for Child Care
The Special Allowance for Child Care rates for women with disabilities have been amended to 3750/- per month, subject to certain circumstances.
These revisions are applicable with effect from January 1, 2024.
