Home / Money / Personal Finance /  7th Pay Commission: Your monthly PF contribution may change from July. Here's how

The central government has frozen Dearness Allowance (DA) for the central government employees till June 2021. While announcing the decision, Centre said that they will continue to announce DA on time but it won't get added in central government servant's salary till June 2021.

However, they made it clear that once, the DA is restored, all three instalments of DA arrears — January to June 2020, July to December 2020 and January to June 2021 — will be added in CGS' salary. Since, 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 or PF balance in the long-term.

How will DA go northward:

If there is no further extension in the DA benefit being given under 7th CPC (Central Pay Commission) to the central government servants (CGS), there will be huge jump in central government employees' DA. As per the AICPI (All India Consumer Price Index) latest data, one can expect at least 4 per cent DA hike for January to June 2021 period. Apart from this, 3 per cent DA announced for January to June 2020 and 4 per cent DA announced for July to December 2020 is also expected to get added in central government employees' existing DA, which is currently at 17 per cent. So, in case of no furtehr extension nof DA freeze, a central government employee's DA can be expected to go up to 28 per cent from existing 17 per cent.

How DA rise will lead to more PF contribution:

As monthly PF contribution is decided on the basis of one's basic salary plus DA. The rise in DA from existing 17 per cent to 28 per cent will not only lead to rise in central government employees' monthly salary. It will lead to rise in their monthly PF contribution as well. And it's a well known fact that rise in PF contribution means rise in PF balance in the long run as more PF interest will get added in one's PF account.

Benefit for pensioners

Like 52 lakh central government employees, 58 lakh retired central government employees or pensioners are also eagerly waiting for their Dearness Relief (DR) benefit restoration as center has freezed both DA and DR till June 2021. Pensioners' DR benefit may also get restored from July 2021 if there is no further extension in DR benefit freezed till June 2021. Like DA for central government employees, center gives DR benefit to the retired central government employees to help them beat the heat of inflation. In this DR benefit, a pensioner's DR gets increased automatically when the DA hike is announced. So, DA restoration may also bring cheer on the face of neasr 58 lakh central government pensioners.

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