Government clarifies on DA for gratuity calculation during DA freeze

The central government has issued a clarification with regards to Dearness Allowance (DA) for gratuity calculation and leave encashment for those central government pensioners who retired between 1st January 2020 to 30th June 2021. According to the latest Office Memorandum (OM) issued by the Department of Expenditure of Ministry of Finance, the gratuity and leave of the govt employees who retired during the period will be encashed without applying the frozen DA for that period. 

Simply put, for pensioners' who retired between 1st January 2020 to 30th June 2021) gratuity and leave will be encashed keeping the DA instalments announced for that period.

Clarifying on the applicable DA for gratuity calculation and leave encashment, the Ministry of Finance Office Memorandum says: "Keeping in view that gratuity and cash payment in lieu of leave are one-time retirement benefits admissible to employees on retirement and employees who retired during the period from 01.01.2020 to 30.06.2021 have been allowed lesser amount than what would have been calculable but for the aforesaid orders of this Ministry dated 23.04.2020 and 20.07.2021, the matter has been considered sympathetically with a view to allowing the same to such employees."

As per the new order, those who retired from 1st January 2020 to 30th June 2020, their DA will be considered 21 per cent (17 + 4) whereas those who retired from 1st July 2020 to 31st December 2020 - their DA will be considered 24 per cent (17 + 4 + 3).

Meanwhile, who retired from 1st January 2021 to 30th June 2021, their applicable DA will be 28 per cent (17 + 4 + 3 + 4). However, this enhanced DA will be applicable for gratuity calculation and leave encashment only.

As per the existing provisions contained in Central Civil Services (Pension) Rules 1972, DA on the date of retirement or death is reckoned as emoluments for the purpose of calculation of gratuity. Also, as per the existing provisions contained in CCS (Leave) Rules 1972, pay is admissible on the date of retirement plus DA on that are reckoned for the purpose of calculation of cash payment in lieu of leave.

In the wake of the Covid-19 pandemic, the central government had decided to freeze DA and DR benefits for central government employees and pensioners from the said period. The centre had said that it would continue to announce DA as it has been doing previously but the increased DA and DR won't get added into the central government employees and pensioners' monthly payments. 

The centre announced 4 per cent DA for January to June 2020, 3 per cent DA for July to December 2020 and 4 per cent DA for January to June 2021 period.