7th Pay Commission: BIG news for govt employees! PF contribution may change from July, know how

7th Pay Commission: BIG news for govt employees! PF contribution may change from July, know how

The government has made an announcement regarding the Dearness Allowance (DA) for the central government employees. The DA for the central government employees will be put on hold till June 2021. While announcing the decision, the Centre said that they will continue to announce DA on time but it won’t get added to central government employee’s salary till June 2021.

However, the three installments of DAs – January to June 2020, July to December 2020 and January to June 2021 – will be restored and they will be added to CGS’ salary and it will further increase the monthly PF contribution or PF balance in the long term. How?

Monthly Provident Fund (PF) contribution is calculated on the basis of a central government’s basic salary plus DA. The DA hike will lead to rise in one’s monthly PF contribution.

As per the AICPI (All India Consumer Price Index) latest data, a 4 percent DA hike for January to June 2021, 3 percent DA for January to June 2020, and 4 percent DA for July to December 2020 can be expected to get added in central government employees’ existing DA, which is currently at 17 percent. If the DA is not delayed anymore, then it can go up to 28 percent from 17 percent.

Rise in DA

The rise in DA from 17 percent to 28 percent will further increase the PF contribution and it will also make changes in the employees’ monthly salary as monthly PF contribution is decided on the basis of one’s basic salary plus DA.

Pensioner to get DR

The 52 lakh central government employees along with 58 lakh retired central government employees or pensioners will also get Dearness Relief (DR) benefit restoration as the Centre has frozen both DA and DR till June 2021.

Centre gives DR benefit to the retired central government employees to help them beat the heat of inflation. In this, a pensioner’s DR gets increased automatically when the DA hike is announced.