Finance Act 2025: No DA Hike or Pay Commission Allowance Changes for Retired Government Staff

Finance Act 2025 does not remove post-retirement benefits like DA hikes or Pay Commission revisions. Rule 37 of CCS (Pension) Rules, 2021 amended regarding the forfeiture of PSU employee retirement benefits.

Clarifying the Rumour on Post-Retirement Benefits

A message widely circulating on WhatsApp alleges that the Indian government, through the Finance Act 2025, has decided to eliminate post-retirement benefits such as dearness allowance (DA) hikes and Pay Commission revisions for retired government employees. This claim suggests a major change affecting millions of pensioners, stating that future DA hikes and Pay Commission benefits would no longer be applicable.

However, this information has been categorically flagged as false. The Finance Act 2025, which is an annual law implementing the government’s budget proposals, primarily deals with financial regulations such as taxes, duties, and public expenditure management. It does not revoke or cancel post-retirement benefits already accrued by government employees or retirees.

What Does the Finance Act 2025 Actually Imply

The Act provides the legal framework for how money is raised and spent by the government during the financial year. Contrary to the circulating message, there has been no withdrawal of key post-retirement benefits, including DA hikes or Pay Commission revisions under this Act.

Existing protections under pension laws and Supreme Court rulings, such as the 1972 Pension Act and the landmark Chandrachud verdict of 1983, remain intact. These safeguards ensure pensioners receive pay equivalent to the last drawn salary plus related benefits, irrespective of the Finance Act.

Any future increases in pension or allowance will be decided independently by the government and implemented prospectively, not retrospectively. This means any revision will be effective from the date of the decision onwards and not applied retroactively.

Amendment to Rule 37 of CCS (Pension) Rules, 2021

Separately, the Department of Pension and Pensioners’ Welfare has announced an amendment to Rule 37 (29)(c) of the CCS (Pension) Rules, 2021, in consultation with relevant government departments, including the Ministry of Finance and the Department of Personnel & Training.

The amended rule specifically addresses cases involving absorbed Public Sector Undertaking (PSU) employees who are dismissed for misconduct after absorption. According to the new provision: "The dismissal or removal from service of the public sector undertaking of any employee after his absorption in such undertaking for any subsequent misconduct shall lead to forfeiture of the retirement benefits for the service rendered under the Government also."

In addition, decisions related to dismissal, removal or retrenchment by the PSU are subject to administrative review by the concerned Ministry. Provisions applicable to government servants under related rules will also apply analogously to these PSU employees.

Read More: Unified Pension Scheme (UPS) Extended to More Retirees: Key Features, Eligibility, and How to Apply! 

Conclusion

• The Finance Act 2025 does not revoke or cancel any existing or future post-retirement benefits such as DA hikes or Pay Commission allowances for retired government employees.
   
• Pension rights and benefits remain protected under the existing legal framework and Supreme Court judgments.
   
• The amendment to Rule 37 of CCS (Pension) Rules, 2021, affects only PSU employees absorbed into undertakings and dismissed for misconduct, resulting in forfeiture of their retirement benefits.
   
• Decisions regarding PSU employee dismissals are subject to administrative review by the respective Ministry.
   
• Pensioners and retired employees should rely on official government communications and verified sources rather than unsubstantiated social media claims.

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