Union Cabinet on Tuesday increased the Dearness Allowance (DA) and Dearness Relief (DR) by 1 per cent to
5%, benefiting 50 lakh employees and 61 lakh pensioners. The Cabinet meeting chaired by Prime Minister Narendra Modi also approved an amendment bill that seeks to double tax-free gratuity for formal sector employees to Rs 20 lakh.
“Release of additional installment of DA is an increase of 1 per cent over the existing rate of 4% of the basic pay/pension, to compensate for price rise,” said the official statement. The new rate will be applicable from July 1.
The combined impact on the exchequer on account of both DA and DR would be Rs 3,068.26 crore per annum and Rs 2,045.50 crore in the financial year 2017-18 (for a period of 8 months from July 2017 to February 2018). This move will benefit about 49.26 lakh Central Government employees and 61.17 lakh pensioners, it said.
Detailing the Cabinet decisions, Union law Minister Ravi Shankar Prasad said the Payment of Gratuity (Amendment) Bill, 2017 will be introduced in next session of Parliament. The amendment will put the maximum limit of gratuity of employees of the private sector as well as public undertakings and autonomous organisations under the Government who are not covered under Central Civil Services (Pension) Rules, at par with Central Government employees, which is Rs 20 lakh. The current upper ceiling on gratuity under the Act is
Rs 10 lakh. The provisions for central government employees under Central Civil Services (Pension) Rules, 1972, with regard to gratuity are also similar.
Before implementation of the 7th Central Pay Commission, the ceiling under CCS (Pension) Rules, 1972, was Rs 10 lakh. However, post rollout, in the case of Government servants, the ceiling stands at Rs 20 lakh, effective January 1, 2016.
Considering inflation and wage increase even in the case of employees engaged in the private sector, the Government is of the view that the entitlement of gratuity should be revised for employees who are covered under the Payment of Gratuity Act, 1972. Accordingly, the Government initiated the process for amendment to the Payment of Gratuity Act, 1972, which applies to establishments employing 10 or more persons.
The main purpose for enacting this Act is to provide social security to workmen after retirement, whether it is because of rules of superannuation, or physical disablement or impairment of vital parts of the body.
Therefore, the Gratuity Act serves as a key social security legislation to wage earners in industries, factories and establishments.