7th Pay Commission: Gratuity Amount Increased By 25% For Central Government Employees; Details

7th Pay Commission:  In a boon for government employees, the Centre's decision to increase dearness allowance for its employees from 4% to 50% has also resulted in a massive revision in other allowances, including retirement gratuity. As per the rules, the gratuity limit and other allowances are automatically revised whenever DA reaches the 50% limit. The Center had increased DA from 4% to 50% for more than 50 lakh employees in March this year. It was also estimated that after this amendment DA would be merged into the basic pay when it reaches 50%. However, the government has currently refused any such proposal.

Gratuity Amount Increases To Rs 25 lakh

In the past, the retirement gratuity payable for eligible service of 33 years or more was 16½ times the base pay plus DA, subject to a maximum of 20 lakh rupees. But with the 50 percent increase in DA, the limit of gratuity payable has been increased by 25 percent. It increased to Rs 25 lakh from the existing Rs 20 lakh from January 1, 2024.

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Amendment in gratuity laws

The Central Board of Direct Taxes (CBDT) issued a notification in March 2019 clarifying that the exemption limit of 20 lakh rupees will apply to employees in case of retirement, death, resignation, or disability on or after March 29, 2018. The amount has been automatically revised to 25 lakh rupees with DA being increased to 50 percent of the base pay.

What is Gratuity?

Gratuity is a special payment given by employers to employees in recognition of their long service. Gratuity is not linked to the regular monthly salary but is part of the CTC (cost to the company) of the employees. Gratuity guidelines are governed by the rules laid down in the Payment of Gratuity Act, of 1972.

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