Union Budget Key Highlights for 7th CPC

There were many expectations around the 7th Pay Commission’s recommendations under the Union Budget 2020, especially regarding an increase in Dearness Allowance (DA).

The 7th Central Pay Commission set up by the central government recommended various measures to improve the pay bands and grade pays of central government employees across the country. The recommendations of the pay commission were filed in a report to the government in November 2015. The commission has recommended increasing the minimum pay of central government employees to Rs.18,000 per month with effect from January 2016.

In the Union Budget 2020, it was expected that the finance ministry would increase the dearness allowance (DA) of the central government employees under the 7th Pay Commission. However it turned out to be disappointment as there wasn’t any.

While there was no increase in the DA, the central government introduced new income tax slabs in the Budget 2020 to give major relief taxpayers. Under the new regime, taxpayers will pay 10% for income between Rs.5 lakh and Rs.7.5 lakh. For incomes between Rs.7.5 lakh - Rs.10 lakh, Rs.10 lakh - Rs.12.5 lakh, and Rs.12.5 - Rs.15 lakh taxpayers shall pay 15%, 20% and 25% respectively.

Expectations of Employees

One of the key recommendations of the 7th pay commission is to increase the maximum pay of employees from Rs.90,000 to Rs.2.5 lakh. The commission also recommended a fitment factor of 2.57 times over the basic pay recommended by the 6th pay commission. Though the salary hike recommendation was significant, it raised the pay gap (between maximum pay and lowest pay) from 1:12 to 1:14. Following this, central government employees demanded that their minimum pay must be increased to Rs.26,000 along with a fitment factor of 3.68 times.