After DA, the government increased the gratuity limit for central employees from 20 lakh to 25 lakh

After increasing the dearness allowance, the central government has now announced to increase in the limit of gratuity. The government has issued a circular to increase it by 25 percent.

7th pay commission DA hike
The central government has decided to increase the gratuity limit of central employees by 25% after the 4% increase in dearness allowance (DA) on March 7 this year, which will be effective from January 1, 2024. With this increase, the gratuity limit has increased from 20 lakh to 25 lakh.

A release issued by the Department of Pension and Pensioners’ Welfare, Ministry of Personnel, Public Grievances and Pensions, said that as per the decisions of the government in the implementation of the recommendations of the Seventh Pay Commission, the maximum limit of retirement gratuity and death gratuity under the Central Civil Services (Pension) Rules, 2021 or Central Civil Services (Payment of Gratuity under National Pension System) Rules, 2021 will be increased by 25% i.e. from 20.00 lakhs to 25.00 lakhs from January 1, 2024.

The decision to increase the gratuity limit was originally made in April this year, but a circular on May 7 put a stop to it.

Gratuity is the amount that the employer pays to his employees in return for the services rendered to the company. However, the gratuity amount is given only to those employees who have been employed in the company for five years or more. It is given in addition to salary, pension, and provident fund (PF). It is governed by the Gratuity Payment Act, of 1972.

Let us tell you, earlier in March, the central government had approved the release of an additional installment of dearness allowance (DA) to employees and dearness relief (DR) to pensioners.

The new rate effective from January 1, 2024, represents an increase of 4% over the existing rate of 46% of basic pay/pension. The hike in dearness allowance and dearness relief compensated for the price hike.

The government said that this increase will put a burden of Rs 12,868.72 crore per annum on the state exchequer and will benefit 49.18 lakh central government employees and 67.95 lakh pensioners across the country.

It is worth noting that with the current dearness allowance reaching 50%, both the upper limit of House Rent Allowance (HRA) and gratuity will increase. The last increase in dearness allowance was in October 2023, when it was increased by 4% from 42% to 46%. The government said that this increase is as per the recommendations of the 7th Central Pay Commission.