The Central Government recently approved a 2% hike in Dearness Allowance (DA) for its employees, effective from January 1, 2025. This increment takes DA from 53% to 55% of the basic salary, benefiting around 48.66 lakh central employees. But apart from salary, how does this affect PF and gratuity calculations? Let’s break it down.
If your basic pay is ₹18,000, then:
Earlier DA @53% = ₹9,540
New DA @55% = ₹9,900
Monthly increase = ₹360
Arrears for 3 months (Jan–Mar) = ₹1,080
So, you’ll see an additional ₹360 in your monthly take-home and a one-time arrears of ₹1,080 in your next salary.
The DA hike affects General Provident Fund (GPF) contributions because it is calculated as a percentage of (Basic Salary + DA). However, this applies only to government employees who joined before 2003. Those under NPS (National Pension System) won’t benefit.
Basic pay = ₹30,000
Earlier DA @53% = ₹15,900 → Total = ₹45,900
GPF @6% = ₹2,754/month
After DA hike:
New DA @55% = ₹16,500 → Total = ₹46,500
GPF @6% = ₹2,790/month
🔹 Extra savings = ₹36/month
Gratuity is also calculated based on basic salary + DA. So the increase in DA will raise gratuity amounts, especially for those close to retirement.
Basic = ₹40,000
DA @53% = ₹21,200 → Final salary = ₹61,200
After 35 years, gratuity = ₹12,35,769
If the employee retires after DA becomes 55%:
Final salary = ₹62,000
Gratuity = ₹12,51,923
✅ That’s a gain of ₹16,154 due to just a 2% DA hike.
📢 Note: The maximum gratuity limit has been raised from ₹20 lakh to ₹25 lakh effective January 1, 2024.
Not everything gets a bump with the DA increase:
HRA remains unchanged, as it only revises when DA crosses 50% (which it already had).
No effect on Medical Allowance, Conveyance, Bonus, LTA, or Reimbursements.
A 2% increase in DA might look modest, but it translates to real gains in monthly salary, PF contributions, and retirement benefits—especially when combined with arrears. For long-serving employees nearing retirement, it could mean thousands more in gratuity. While not everything changes, your financial well-being certainly gets a little boost.
