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7th Pay Commission: Gratuity for Central government employees to increase to Rs 7 lakh? Check full calculation

If an employee earns a basic salary of Rs 40,000 at the time of retirement, then their gratuity, Leave Encashment amount will increase by Rs 1,17,000.

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The Centre has some more good news for its employees. After increasing the Dearness Allowance (DA) and Dearness Relief (DR) to more than one crore central employees and pensioners, the government has now asked calculation of Gratuity and Leave Encashment to be considered for the same. 

This is applicable for all Central Government employees who retired between January 1, 2020, and July 30, 2021. 

It may be recalled that the Central government had recently approved a hike for Central government employees taking the DA to 28%. But according to reports, the Centre is now planning to hike the DA to 31%. The DA was earlier at 17% but in July the DA was hiked to 28%. 

Now, according to the rules of the Central Civil Services (Pension) Rules, 1972, the DA, at the time of retirement or death of the employee is considered as compensation for calculation of gratuity. So, according to the Office Memorandum (OM) issued by the Department of Expenditure, the retirement benefits of these employees will be calculated as follows. 

  1. If an employee retired between January 1, 2020, and July 30, 2021, then the applicable DA rate will be 21% - 17% + 4% from January 1, 2020, to June 30, 2020.
  2. If an employee retired between July 1, 2020, to December 31, 2020, then the applicable DA rate will be 24% - 17% + 4% from January 1, 2020, to June 30, 2020, + 4% from July 1, 2020, to December 31, 2020.
  3. If an employee retired between January 1, 2021, to June 30, 2021, then the applicable DA rate will be 28% - 17% + 4% from January 1, 2020, to June 30, 2020, + 4% from July 1, 2020, to December 31, 2020, + 3% for January 1 to June 30 2021.

7th Pay Commission: Up to Rs 7 lakh increase in Gratuity 

Former President of AG Office Brotherhood, Prayagraj, HS Tiwari was quoted by Jagran as saying that if an employee earns a basic salary of Rs 40,000 at the time of their retirement, then their gratuity and Leave Encashment amount will increase by about Rs 1,17,000. (because of the DA increase), Meanwhile, if the basic salary is Rs 2,50,000 per month, then the retirement fund will increase by more than Rs 7 lakh.

Notably, the gratuity payment is effective after an employee completes five years of service, as per the current provisions. However, this will soon change as under the new labour code employees will only require to complete 1 year of service for gratuity payment to be effective.

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