7th Pay Commission: Central government employees alert! This may happen to your Provident Fund (PF)

7th Pay Commission: Central government employees are on the cloud nine these days. The reason for this is a double bonanza coming for the central government servants (CGS) in next few months.

7th Pay Commission: As per the 7th CPC salary rules, once the DA is restored for CGS, their Provident Fund (PF) passbook balance will also grow at the faster pace. Photo: Reuters

7th Pay Commission: Central government employees are on the cloud nine these days. The reason for this is a double bonanza coming for the central government servants (CGS) in next few months. As per the media buzz, the center may announce 4 per cent Dearness Allowance (DA) due from January 2021. Apart from this, their DA restoration is expected from July 2021 as the center has freezed DA till June 2021. However, as per the 7th CPC (Central Pay Commission) salary rules, once the DA is restored for CGS, not just their monthly salary will go up, their Provident Fund (PF) passbook balance will also grow at the faster pace. Reason for this accelerated PF balance growth is the rise in monthly PF contribution after DA jumping to the tune of 28 per cent from existing 17 per cent.

Seventh Pay Commission: PF calculator

Speaking on how a central government employees PF balance will grow at a faster pace after DA restoration Kartik Jhaveri, Director — Wealth Management at Transcend Consultants said, "After DA restoration, one's DA is expected to rise from 17 per cent to 28 per cent. In that case, the PF calculator suggests that one's PF contribution would become more as PF contribution is calculated on the basis of basic salary plus DA."

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DA restoration: How PF balance will grow faster

Suppose a central government employees basic salary is Rs 20,000. In that case one's PF contribution is 12 per cent of one's basic salary plus 17 per cent DA. Once the DA would become 28 per cent after restoration, the monthly PF contribution will be calculated on one's Rs 20,000 basic salary plus 28 per cent DA. As the Pf contribution will be higher, one's PF balance in the long-term is expected to yield more as more investment means more money.

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