Central government hikes gratuity limit for employees by 25%
The Indian government has raised the gratuity limit for its employees by 25%. The revised gratuity limit, now set at ₹25 lakh from the previous ₹20 lakh, is effective from January 1, this year. This decision was announced in an Office Memorandum dated May 30, 2024, based on recommendations from the Seventh Pay Commission.
Gratuity increase follows dearness allowance hike
The decision to raise the gratuity limit comes after a 4% rise in the dearness allowance (DA). This DA hike has led to significant changes in various allowances, including retirement gratuity. Alongside the DA rise, other allowances such as transport allowance, canteen allowance, and deputation allowance have also been raised by 25%. The combined impact on the exchequer from both DA and dearness relief (DR) increases will be ₹12,868.72 crore per annum.
Gratuity: A reward for long-term service
Gratuity is a reward given by an employer to a worker who has served for at least five years. It is provided in addition to salary, pension, and the provident fund (PF). The rise in gratuity and allowances aims to provide financial security, and keep up with rising living costs. This latest decision is set to benefit around 49.18 lakh central government employees and 67.95 lakh pensioners across the country.
