7th Pay Commission: Here’s How Your PF Contribution May Change From July

Dearness Allowance (DA), which has been due since January 2021, is gleefully awaited by Central Government employees. According to the latest data from All India Consumer Price Index (AICPI), the DA may rise by at least 4% for January to June 2021. However, there is a special benefit since the Center is due to restore DA on July 1st after setting the hike on pause. This is also a positive sign for former central government employees, as their Dearness Relief (DR) benefits will be reinstated as a result of the DA restoration. Anurag Thakur, Minister of State Finance and Corporate Affairs., stated this in a written reply to the Rajya Sabha. Starting July 1, all central government employees will get maximum benefits of dearness allowance (DA), according to the minister.

For over 50 lakh central government employees and over 65 lakh retirees or pensioners, the Centre's decision to restore pending DA from July 2021 would be positive news. After the DA is restored, the DA for central government employees will increase from 17 percent to 28 percent. This comprises a 3% DA revealed for January to June 2020, a 4% DA for July to December 2020, and a 4% DA for January to June 2021. Besides this, central government employees will prosper from the decision, as the DA increase is proportional to Dearness Relief (DR). This implies that as the DA of central government employees rises, the DR of retirees rises as well. A central government employee's salary is expected to rise as the DA rises from 17 to 28 percent. And apart from that, they will get three DA arrears in installments. The spike in DA will have a direct impact on Central government employees' DA, HRA, Travel Allowance (TA), and medical allowance. The spike in DA from 17% to 28% would not only result in a spike in the monthly salary of central government employees. This will also result in an increase in their monthly PF contribution. And it's common knowledge that the PF contributions leads to an increase in PF balance over time as more PF interest is applied to one's account. And since, monthly PF contributions have been determined on the basis of a central government employee's basic salary plus DA. In the long run, the DA increase would result in an increase in one's monthly PF contribution or PF balance. 58 lakh former central government employees or pensioners are still looking for their Dearness Relief (DR) benefits to be restored, since the centre has frozen all DA and DR benefits until June 2021. Pensioners' DR benefits may be restored starting in July 2021 if the DR benefit freeze is not extended through June 2021. And when the DA hike is declared, a pensioner's DR is automatically increased under this DR benefit.