Pension Update: Govt Clarifies On DR, Says It's Based On Original Basic Pension Before Commutation

Dearness relief (DR) to central government pensioners is payable on the original basic pension before commutation, according to a clarification issued by the Ministry of Personnel, Public Grievances & Pensions. It comes after the confusion whether the DR benefit is payable on the original basic pension before commutation or on the reduced pension after commutation.

“References/ representations have been received in this department seeking clarification whether the dearness relief is payable on original basic pension or on pension as reduced after commutation. It is clarified that dearness relief is payable on the original basic pension before commutation or such basic pension before commutation as revised on implementation of recommendations of the Pay Commission etc. and not on the pension as reduced after deduction of commuted pension,” said the Department of Pension & Pensioners’ Welfare in the clarification on pension calculation.

A central government employee has an option to commute a portion of pension, not exceeding 40 per cent, into a lump sum payment.

Under Rule 52 of CCS (Pension) Rules, 2021, DR benefit being given to retired central government employees and family pension beneficiaries is granted to pare the price rise.

The DR rates for central government pensioners is 38 per cent currently under the 7th Central Pay Commission (7th CPC). It is calculated on the basic pension before commutation and not on the reduced pension after commutation. The 38 per cent DR rate is applicable from July 1, 2022, as central government recently announced 4 per cent DA and DDR hike.

In a decision that will benefit 50 lakh central government employees and 65 lakh pensioners, the Union Cabinet in September approved a hike of 4 per cent in dearness allowance (DA) and dearness relief (DR), effective July 1, 2022. The 4 per cent hike took the DA and DR to 38 per cent of basic pay or pension, respectively.

The additional financial implications on account of this increase of DR to pensioners were estimated at Rs 6,261.20 crore per annum; and Rs.4,174.12 crore in the financial year 2022-23 (i.e. for a period of 8 months from July 2022 to February 2023).

DA and DR are revised twice a year on the basis of retail inflation. Dearness allowance (DA) is given to government employees, while dearness relief (DR) is for pensioners.

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