Cabinet approves another DA hike for Central government employees

In good news for the Cabinet on Thursday (October 21) approved a 3% hike in Dearness Allowance for Central Government employees and pensioners.

In July 2021, Prime Minister Narendra Modi led the government at the Centre decided to hike Dearness Allowance (DA) and Dearness Relief (DR) paid to government employees and pensioners respectively to 28% from 17%. The new increased DA and DR came into effect from July 1. It is to be noted that the DA hike was frozen in 2020 for the period January 2020 to June 2021 because of COVID-19 outbreak.

The DA hike, however, was not given retrospectively and that's why the central government employees who retired between January 2020 to June 2021 were confused over the DA rate that will be applicable for the calculation of their gratuity, leave encashment and other retirement benefits.

In order to end the confusion, the Union Finance Ministry recently issued details related to the calculation of gratuity and leave encashment for the central government employees, who retired between January 2020 to June 2021. The government has also notified the amount of DA that the Centre will consider for calculation of gratuity and leave encashment.

Later, the Centre also decided to increase the House Rent Allowance (HRA) of the Central government employees from August 2021.

While issuing the order, the Centre had said that the DA and HRA of Central government employees should be increased on the basis of their basic salary. As per the rules framed by the Centre, the HRA would be increased by 3 per cent when DA crosses 25 per cent of the employee’s basic pay. The Department of Expenditure had issued an order in 2017 saying that when the DA will exceed 25%, the HRA will be revised automatically.

According to the government's order, the HRA is divided into three categories according to the cities - X, Y and Z. After revision, HRA for X category cities will be 27 per cent of basic pay, similarly, HRA for Y category cities will be 18 per cent of basic pay while for Z category cities it will be 9 per cent of basic pay.

According to the 7th Pay Commission Pay Matrix, the minimum basic salary of central government employees is Rs 18,000. On this basic salary of Rs 18,000, Central government employees were getting DA of Rs 3060 till June 2021 at the rate of 17 per cent. Since July 2021, the Central government employees have started getting Rs 5040 every month as per the DA of 28%. It means there is an increment of Rs 1980 in the monthly salary of the employees. Accordingly, the pension of the pensioners will also be decided.