New Delhi: The Union Government on Tuesday hiked the Dearness Allowance (DA) and dearness relief for central government employees and pensioners by 1%, and approved a bill to raise the ceiling of tax-free gratuity from Rs 10 lakh to Rs 20 lakh for private sector employees.
The decision was taken at the Union Cabinet meeting chaired by Prime Minister Narendra Modi in New Delhi.
The increase in dearness allowance and dearness relief to 5% from 4% will benefit around 49.26 lakh central government employees and 61.17 lakh pensioners, Union minister Ravi Shankar Prasad said.
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).
In a statement, the government said Tuesday’s decisions — particularly the one on the gratuity bill — were made after considering the increase in inflation and wages.
“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, which is an important social security legislation to wage earning population in industries, factories and establishments", the statement said.