The Centre has recently hiked the dearness allowance (DA) by 3% for central government employees. When the dearness allowance hit 50%, the government increased several other allowances, resulting in higher take-home pay for central government employees. With the dearness allowance now at 53%, will the government also raise other allowances, as it did previously? ET Wealth Online spoke to experts to find out.
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DA hits 50%: HRA, gratuity, and other allowances increased
The 7th Pay Commission has recommended that certain allowances be increased when the dearness allowance crosses the 50% mark. According to a circular by the Employees’ Provident Fund Organisation (EPFO) dated July 4, 2024, “Attention is drawn to the following orders issued by Department of Expenditure/DoPT in the past and request that consequent upon the increase of Dearness Allowance by 4% to 50% w.e.f. 01.01.2024, the payments of the following allowances wherever applicable may be made at enhanced rates of 25% over the existing rates w.e.f. 01.01.2024.”
These allowances are:
1) House rent allowance or HRA
2) Touch location allowance
3) Conveyance allowance
4) Special allowance for children of women with disabilities
5) Children’s education allowance
6) Hotel accommodation
7) Reimbursement of travelling charges for travel within the city (touring station)
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8) Reimbursement of food charges/lump sum amount or daily allowance or journeys performed by own car/taxi, auto rickshaw, own scooter etc. at the place where no specific rate has been prescribed by the director of transport of concerned state or the neighbouring state
9) The rate of transportation of personal effects by road on transfer, etc.
10) Dress allowance,
11) Split duty allowance
12) Deputation (duty) allowance
Additionally, the maximum limit for retirement gratuity and death gratuity is increased by 25%, from Rs 20 lakh to Rs 25 lakh, effective January 1, 2024.
Now DA reaches 53%: Will HRA, gratuity, and other allowances increase this time as well?
When asked whether these allowances will see an increase this time as well, Vishal Gehrana, Principal Associate, Karanjawala & Co. and Advocate on Record, Supreme Court, says, “No, under the 7th Central Pay Commission, the new system has evolved where crossing the 50% DA threshold does not automatically increase other allowances. In present, the revision of these components is not attached directly to DA but is subject to a separate decision by the Government of India.
Echoing the same, Arjun Goswami, Director, of Public Policy, Cyril Amarchand Mangaldas says, “It is unlikely that we will see an accompanying increase in other allowances this time.”
“In simple words, without an official notification or policy from the Government of India, there will be no modification to the allowances like HRA, even if DA touches the 53% mark,” Gehrana mentions.
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As the dearness allowance has touched 53%, will it be merged with basic pay?
Another questions which many people want an answer is whether their basic salary will rise when DA crosses certain levels. Debjani Aich, Partner, IndusLaw, answers, “The increased DA will not be included in a central government employee’s basic pay. This has been clarified by the Department of Expenditure (DoE) on October 21, 2024, through an office memorandum that stated that DA will continue to be a distinct element of remuneration and will not be included within the ambit of ‘pay’ as defined under the Fundamental Rules (FR) applicable to government employees.”
“Under FR 9(21), ‘Pay’ means the amount drawn monthly by a government servant as (i) the pay, other than special pay or pay granted in view of his personal qualifications, which has been sanctioned for a post held by him substantively or in an officiating capacity or to which he is entitled by reason of his position in a cadre; (ii) overseas pay, special pay and personal pay; and (iii) any other emoluments which may be specially classed as pay by the President. DA has been clarified to be excluded from the overmentioned definition of ‘pay’ by the DoE,” she explained. This approach is in broad consonance with the Code of Wages, 2019, where dearness allowance is a separate item in addition to an employee’s basic pay (and any retaining allowance).
