The Indian government has raised the maximum limit of retirement gratuity and death gratuity from Rs 20 lakh to Rs 25 lakh, effective from January 1, 2024. This revision, issued by the Ministry of Personnel, Public Grievances and Pensions, aims to enhance benefits for Central government employees.
EPFO Holds Gratuity Hike
Despite expectations, the Employees’ Provident Fund Organisation (EPFO) has put on hold a previously announced 25% increase in retirement and death gratuity for employees. This decision comes as a setback to government employees, as the EPFO cited reasons related to Dearness Allowance (DA) hike for this suspension.
Impact of DA Hike on Gratuity
According to the rules of the 7th Pay Commission, when the Dearness Allowance reaches a 50% ceiling, gratuity limits and other allowances are automatically revised. The recent increase in DA to 50% had led to expectations of automatic gratuity revisions. However, the EPFO’s decision indicates a lack of immediate government plans in this regard.
Understanding Gratuity for Central Government Employees
Gratuity is a defined benefit plan provided by employers to employees who have served continuously for five years or more. Governed by the Payment of Gratuity Act, 1972, it is available to employees who have rendered at least five years of continuous service.
Total DA Hike Reaches 50%
The government recently increased Dearness Allowance (DA) to Central Government employees and Dearness Relief (DR) to pensioners by 4%, effective from January 1, 2024. This raised the total DA to 50% for government employees. Additionally, other allowances such as transport allowance, canteen allowance, and deputation allowance were increased by 25%.