7th Pay Commission: How basic salary, DA, other allowances of central government employees are calculated

7th Pay Commission: To understand how the monthly salary of central government employees are decided, one needs to understand the arithmetic involved in calculating basic salary. As per the Central Government rules, there is a fixed amount of monthly salary to be paid to any of the central government employees which is called basic salary. It is decided on the basis of one's grade pay and level of employment. Once the basic salary is calculated, other allowances like Dearness Allowance (DA), Travel Allowance (TA), Housing Rent Allowance (HRA), etc. are decided as they are in percentage terms of the basic salary.

As per the central Government norms, the center decides only the basic salary of its employees as per the recommendation of the latest pay commission's report. On the basis of this CPC recommendation, various allowances of the central government employees are decided for the next 10 years. Currently, as per the 7th CPC, minimum basic salary is decided at Rs 18,000 per month while for the Grade 'A' basic salary is fixed at Rs 56,100 per month. For Group 'C' employees the basis salary is Rs 35,400 per month.

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Profit and loss of high basic salary

If a central government employee has a higher basic salary then tax liability will go up as the basic salary is a taxable part of an earning individual. However, due to the higher basic salary PF, Gratuity deduction will be higher that leads to higher returns at the time of retirement.