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DA restoration to boost PF, gratuity of CGS

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7th pay commission pay matrix: The Dearness Allowance (DA) restoration of the central government employees is going to take place from 1st July. The center has already made an announcement in this regard as the Minister of State (MoS) at the Ministry of Finance has already made an announcement in this regard in the Rajya Sabha in March 2021. However, for further information to the central government employees, DA restoration will not just lead to rise in their monthly 7th CPC salary but it would lead to boost for their Provident Fund (PF) and gratuity as well. According to tax and investment experts and central government employees representative, DA restoration will definitely push Central Government Servants’ (CGS’) monthly salary as their DA will jump from existing 17 per cent to at least 28 per cent, but in the long-term, it will have positive impact on central government employees’ retirement corpus like PF and gratuity as well.

7th CPC DA hike to push PF balance

Speaking on the benefits of DA restoration from 1st July 2021 Kartik Jhaveri, Director — Wealth Management at Transcend consultants said, “A central government servant’s PF contribution is calculated on the basis of one’s basic salary plus DA. As the DA will go up from existing 17 per cent to around 28 per cent, there will be rise in employee and employers contribution in monthly PF contribution. This will lead to rise in PF balance in the long-term.”

Standing in sync with Kartik Jhaveri’s views, SEBI registered tax and investment expert Jitendra Solanki said that a central government employee’s gratuity contribution is calculated on the basis of basic salary plus DA. As DA is going to rise from 1st July 2021, a central government employee’s gratuity contribution will definitely go up leading to higher retirement corpus in the long-term time horizon.

Calculation for DA hike

On how DA will rise from existing 17 per cent to 28 per cent Shiva Gopal Mishra, Secretary — Staff Side at National Council of JCM said, “DA for central government employees have been freezed from 1st January 2020 to 30th June 2021. That means, 3 per cent DA hike announced for 1st January 2020 to 30 June 2020, 4 per cent DA hike announced for 1st July 2020 to 31st December 2020 will get added in the existing DA of 17 per cent. Now, DA hike for 1st January 2021 to 30th June 2021 is also awaited. As per the 7th Pay Commission DA hike rules, average inflation for July to December 2020 period is around 3.5 per cent that means the minimum DA hike that the center would announce will be 4 per cent (nearest higher round figure of the average inflation).” So, the net rise in DA expected from 1st July 2021 is at least 11 per cent (3 + 4 + 4). Mishra of JCM also said that this rise in DA from 1st July 2021 will lead to rise in central government employees’ PF and gratuity balance in long-term perspective.

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