7th Pay Commission latest news: Central government employees alert! Your DA, PF, Gratuity, other allowance may change next fiscal

7th Pay Commission latest news: The Central Government is in full swing to implement New Wage Code Act from 1st April 2021. After the implementation of this New Wage Code Act 2021, the minimum basic salary of central government employees will become at least 50 per cent of the net CTC, which means monthly allowance won't go beyond 50 per cent of net CTC. So, the new wage code will impact one's allowances like Dearness Allowance (DA), Travel Allowance (TA), House Rent Allowance (HRA), etc. This is because from 1st April 2021, if the New Wage Code gets implemented, then one's allowance can't go beyond 50 per cent of one's net CTC. Since the monthly Provident Fund (PF) and Gratuity contribution is linked to the basic salary of a central government servant, it will impact one's PF and Gratuity too.

Impact on Dearness Allowance (DA), HRA, TA
"The New Wage Code Act 2021 puts a ceiling on allowance at 50 per cent of the net monthly CTC, which means one's monthly allowance can't be more than 50 per cent of its net CTC. Since DA, TA, HRA, etc. fall under the allowance heads. They are bound to get affected once the New Wage Act 2021 gets implemented," said Jitendra Solanki, SEBI registered tax and investment expert, while speaking on how the New Wage Code Act 2021 will impact  central government employees' monthly allowances like dearness allowance, travel allowance, house rent allowance and other such benefits. 

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Impact on Provident Fund (PF), Gratuity
"When New Wage Code gets implemented, one's monthly PF and Gratuity will get changed too as the monthly PF and Gratuity contribution is calculated on monthly basic plus dearness allowance. Since, both DA and basic salary will change, one's provident fund and Gratuity contribution is bound to change after New Wage Act 2021 is put into effect," said Kartik Jhaveri, Director — Wealth Management at Transcend Consultants while speaking on how New Wage Code Bill will impact a central government employees.

However, both tax and investment experts re-iterated that the central government employees are drawing their salary under the seventh pay commission (7th CPC), which is already more or less close to the New Wage Act 2021. They said that it will have a major impact on the private sector employees, however, they also maintained that New Wage Code would definitely lead to change in the PF, Gratuity, DA, HRA and other allowances of a central government servant (CGS).