7th Pay Commission recommendations on Gratuity

| December 3, 2015

7th Pay Commission recommendations on Gratuity

7th CPC recommends for raising Gratuity from the existing ₹10 lakh to ₹20 lakh from 01.01.2016. 7th Pay Commission further proposes for DA indexed Gratuity viz., increase by 25 percent whenever DA rises by 50 percent.

Enhancement in the Gratuity Ceiling and its Indexation

A number of representations have been received by the Commission stating that there is a need to revise the existing ceiling of ₹10.00 lakh with regard to payment of service gratuity.

Analysis and Recommendations

Rule 49 and 50 of the CCS (Pension) Rules provides that a government servant is entitled to get retirement gratuity equal to one-fourth of his emoluments for each completed six monthly period of qualifying service subject to a maximum of 16.5 times of the last emoluments subject to a maximum of ₹10 lakh.

The Commission sought the views of the government in this regard. The Department of Pension and Pensioners Welfare stated that the VI CPC has increased the amount of gratuity from ₹3.5 lakh to ₹10 lakh w.e.f. 01.01.2006. This amount, in the view of the department, is not commensurate with emoluments that areavailable to senior officers at the time of retirement. The department has suggested to the Commission that a view could be taken to index gratuity with amount of DA admissible at the time of retirement.

The Commission notes that there is merit in the argument advanced to index the ceiling on gratuity so that the benefits of the enhanced ceiling are available to personnel in a manner which is more even over a time frame.The Commission recommends enhancement in the ceiling of gratuity from the existing 10 lakh to 20 lakh from 01.01.2016. The Commission further recommends, as has been done in the case of allowances that are partially indexed to Dearness Allowance, the ceiling on gratuity may increase by 25 percent whenever DA rises by 50 percent.

Rationalisation of Death Gratuity

The Commission has received representations pointing to a need for rationalization of current slabs for death gratuity, especially for the slab of 5 to 20 years of qualifying service in which family pensioners are stated to be placed at a disadvantageous position.

Analysis and Recommendations

As per Rule 50 of Pension Rules, the death gratuity admissible will be as follows, subject to the maximum limit prescribed for the gratuity:

Length of Service Rate of Death Gratuity
Less than one year 2 times of monthly emoluments
One year or more but less than 5 years 6 times of monthly emoluments
5 years or more but less than 20 years 12 times of monthly emoluments
20 years or more Half month of emoluments for every complete six monthly period of qualifying service subject to a maximum of 33 times of monthly emoluments

The Commission sought the views of the government in this regard. Department of Pension and Pensioners Welfare stated that it had received similar demands from pensioners’ association and it feels a need for a review of the existing slabs for death gratuity.

The Commission, after examination of the matter, recommends the following revised rates for payment of death gratuity:

Length of Service Rate of Death Gratuity
Less than one year 2 times of monthly emoluments
One year or more but less than 5 years 6 times of monthly emoluments
5 years or more but less than 11 years 12 times of monthly emoluments
11 years or more but less than 20 years 20 times of monthly emoluments
20 years or more Half month of emoluments for every complete six monthly period of qualifying service subject to a maximum of 33 times of emoluments

Reduction in the time period for Restoration of Basic Pension

The Commission has received a number of representations requesting reduction of restoration period of commuted portion of pension from the existing 15 years.

Category: Finance Ministry, Seventh Pay Commission

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