7th Pay Commission: Centre increases tax exemption limit on gratuity from Rs 20 lakh, know details

7th Pay Commission, Tax Limit on Gratuity: The central government on Thursday evening announced a four per cent jump in dearness allowance (DA) and dearness relief (DR) for crores of central government employees and pensioners. In the meeting where new rates of DA and DR were discussed, Centre also decided to increase the tax exemption limit for gratuity. The government has increased the tax exemption limit on gratuity to Rs 25 lakh.

Also Read | DA Hike Announced: How is dearness allowance calculated for central government employees?

Earlier, the limit was Rs 20 lakh, which was increased from Rs 10 lakh in a notification dated March 8, 2019.

7th Pay Commission: 4% increase in dearness allowance

As far as the DA and DR are concerned, after a four per cent hike in each, both have increased from 46 per cent to 50 per cent.

The new rates of DA and DR will be applicable from January 1, 2024.

#Cabinet has approved the decision to hike dearness allowance for central government employees and pensioners by 4 %.

▪️Now the #DA will reach to 50%.

▪️House Rent allowance will be increased. Now gratuity limit has reached to 25 lakh rupees - Union Minister @PiyushGoyal… pic.twitter.com/jRcmR88W5y

— All India Radio News (@airnewsalerts) March 7, 2024

The arrears of the new rates will be credited along with the salary at the end of March.

Also Read | DA Hike Announced: Central govt employees to get 4% increase in dearness allowance | 7th Pay Commission

This is the fourth consecutive time that DA has been increased by 4 per cent.

The increase in DA will increase the burden on the government exchequer by Rs 12,868.72 crore.

Also Read | 7th Pay Commission: Along with 4% DA, Centre also hikes HRA; know new limits

7th Pay Commission: DA will become 0 after 50 per cent

Central employees will get 50 per cent DA from January 2024.

But, after this, the dearness allowance will be reduced to zero.

After this, the calculation of dearness allowance will start from 0.