Government Employees Receive Boost in Allowances as Dearness Allowance Reaches 50%
In a significant update for government employees, the recent increase in Dearness Allowance (DA) to 50% has triggered a cascade of benefits, impacting various allowances including gratuity. The adjustment, which came into effect following the government’s announcement in March, marks a substantial milestone for those in public service or with family members employed in governmental roles.
Changes Triggered by Dearness Allowance Reaching 50%
The pivotal change stipulated by regulations mandates that when DA hits the 50% mark, a slew of other allowances, including gratuity, undergo automatic increments. While speculation had circulated regarding the merging of DA into basic pay upon reaching this threshold, the government has currently dismissed such a move.
Gratuity Limit Expanded, Offering Up to Rs 5 Lakh More
Under previous regulations, gratuity for employees with 33 or more years of service was set at 16 and a half times the basic salary and DA, with a maximum cap of Rs 20 lakh. However, with DA now soaring to 50%, the gratuity ceiling has surged by 25% to Rs 25 lakh. This substantial revision translates into a potential additional gratuity of Rs 5 lakh for government employees compared to previous provisions.
Tax Exemption Granted on Gratuity
Government employees are set to benefit from income tax exemptions on gratuity receipts. This tax relief extends not only to Central Government personnel but also to their counterparts in State Governments and local bodies. An order issued by the government in March 2019 delineated the tax exemption limit on gratuity, exempting amounts up to Rs 20 lakh. This concession applies to employees retiring, deceased, resigned, or disabled on or after March 29, 2018.
Enhanced Housing Rental Allowance (HRA)
The amplification in DA also translates into augmented Housing Rental Allowance (HRA) for eligible employees. With the increase in DA, central employees residing in X, Y, and Z category cities are slated to receive a boost in their housing allowances. Additionally, in accordance with directives from the Ministry of Personnel, the limit for children’s education allowance and hostel subsidy will increase by 25% once DA reaches the 50% mark. The ministry has initiated measures to ascertain the revised amounts for these allowances in light of the DA hike effective January 1, 2024.
This comprehensive overhaul in allowances underscores the government’s commitment to enhancing the welfare and financial security of its employees, providing a welcome boon amidst economic fluctuations and evolving fiscal landscapes.