May 18, 2024
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7th pay commission for pensioners: How it is calculated and its benefits

The 7th Pay Commission recommends changes in salaries of central government employees but that is not where their jurisdiction stops. The commission also has a say in the pensions of the said employees. However, before we delve into the calculations and benefits associated with it, it is important to understand the 7th pay commission.

What is the 7th pay commission?

The Government of India has a Pay Commission that suggests changes in the salary structure of central government employees. 7 pay commissions have been implemented in the country since independence. The 7th pay commission, the latest one to be implemented, was slated to be executed in January 2016, however, due to certain hold ups the submission of reports was delayed till July 2016. The government in power made additional tweaks to it in early 2019 and further changed the salary and pension structure of central government employees.

How the pension is calculated?

A committee was set up on the advice of the 7th Pay Commission to make changes to the National Pension Scheme. Under the changes, the Government of India increased its contribution to the pension fund from 10% to 14%.

Two formulations have been provided by the government for pension fixation for central government employees who retired before 1 January 2016 and those who retired before 1 January 2006. According to the recommendations, the central government employees whose retirement date was before 2016 will be changed in the Pay Matrix. The pension will be fixed based on grade pay and pay band during the time of their retirement.

To determine the retiree’s notional pay, the amount will be hiked by adding the number of increments the person has earned in a specific level during his/her service period. The increments will be added at a rate of 3%, and half of the amount after this addition will be deemed as the revised pension.

Under the second formulation, the pension fixed according to the 6th Pay Commission’s recommendation will be multiplied by 2.57 to determine the revised pension’s alternative value.

You can easily calculate your revised pension online. Mentioned below are the steps you have to follow to calculate your revised pension:

  • Visit the official website of Pensioner’s Portal provided by the Government of India

  • Click on ‘Pension Calculator’ located on the right side of the home page.

  • It will direct you to a new page where you can select from the following options

  • Pre-2006 pensioners

  • Post-2006 pensioners (01.01.2006 to 31.12.2015)

  • Post-2016 pensioners

  • Dearness relief

  • There are sub-categories under each of the classifications where you can choose to calculate the revised pension, gratuity, basic pension, etc.

  • The ‘post-2006 pensioners’ option provides a revised calculator according to the 7th Pay Commission.

  • Click on it to go to the calculator page.

  • You will be required to enter the following details:

  • Type of pension

  • Basic pension as on 31.12.2015

  • Retirement period

  • Pay scale

  • Basic pay on retirement

  • After entering the relevant details, click on ‘Get revised pension’ to get the amount.

Illustration of pension fixation under the 7th pay commission

The 7th Pay Commission has provided two illustrations stating two cases to explain how the changes will work.

Case 1: In this example, the pensioner retired on 31 May 2015. His last salary was Rs.79,000 under the 6th Pay commission in the pay scale of Rs.67,000-79,000.

Amount

Basic Pension Fixed under 6th Pay Commission

Rs.39,500

Revised pension Fixed under 7th Pay Commission (By multiplying with 2.57)

Rs.1,01,515

Case 2: In this example, the pensioner’s last salary was Rs.4,000 drawn on 31 January 1989 under the 4th Pay Commission in the pay scale of Rs.3,000-100-3500-125-4500.

Amount

Basic Pension fixed under 4th Pay Commission

Rs.1,940

Basic Pension fixed under 6th Pay Commission (Revised)

Rs.12,600

Revised Pension fixed under 7th pay commission (By multiplying with 2.57)

Rs.32,382

Benefits for retirees under the 7th pay commission

Mentioned below are some of the benefits retirees can receive under the 7th pay commission:

  • Death gratuity: The death gratuity is payable to the family or nominee selected by the government servant if he/she passes away in harness. The death gratuity is calculated in the following ways:

Service period

Rate

Less than 1 year

2 times of basic pay

1 year or more but less than 5 years

6 times of basic pay

5 years or more but less than 11 years

12 times of basic pay

11 years or more but less than 20 years

20 times of basic pay

20 years or more

Half of emoluments for each 6-month period completed of service period (33 times maximum)

  • Pension: A central government employee is entitled to receive pension after completing at least 10 years of service.

  • Commutation of pension: Government employees have the option to commute a part of the pension into a lump sum payment. The amount should not exceed 40% of the total pension amount.

  • Retirement gratuity: Government employees who have completed at least 5 years of qualifying service are eligible for retirement gratuity. It is calculated as one-fourth of a month’s basic pay in addition to dearness allowance drawn on the retirement day for each completed six monthly period of the service tenure. A maximum of Rs.20 lakh is allowed as retirement gratuity.

  • Service gratuity: A retiring government employee is eligible for service gratuity if the employment period was less than 10 years. No pension is paid in such cases. It is an addition to the retirement gratuity and is calculated as half moth’s basic pay plus dearness allowance for each six monthly period completed in the qualifying service.

Source:

https://www.bankbazaar.com/tax/7th-pay-commission.html

https://www.bankbazaar.com/tax/7th-pay-commission-pension-calculator.html

https://pensionersportal.gov.in/retire-benefit.asp

https://pensionersportal.gov.in/PensionCalculators/RevisedPensionCalculator_2016_new/RevisedPensionCalculator.asp

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