In a significant policy decision aimed at ensuring pensionary fairness, the Department of Personnel and Training (DoPT) has formally approved the grant of notional increment for Central Government employees who retire a day before their scheduled annual increment — that is, on June 30 or December 31. This increment will be considered solely to calculate pension benefits.

The decision, outlined in an Office Memorandum dated May 20, 2025, comes after extensive deliberations and legal scrutiny, including consultations with the Department of Expenditure and the Department of Legal Affairs. The DoPT stated that employees who rendered qualifying service with satisfactory conduct up to their retirement date will now be eligible for this notional benefit.

Historically, Rule 10 of the Central Civil Services (Revised Pay) Rules, 2006, fixed July 1 as the uniform date for annual increments. The 2016 revision introduced a second increment date — January 1 — creating a biannual increment structure. However, employees retiring just a day before these dates often miss out on the increment, negatively affecting their pension calculations.

The matter gained judicial attention following a 2017 judgment by the Madras High Court, which permitted a notional increment to a retiring employee for the calculation of pension. Initially, the DoPT implemented the judgment only for the concerned petitioner. However, as multiple representations and legal cases surfaced across tribunals, High Courts, and the Supreme Court, the issue evolved into a broader policy matter.

In a landmark 2023 ruling, the Supreme Court held that such employees are entitled to receive a notional increment for having completed a full year of service with good behaviour and efficiency. The Court later extended this relief in 2024 to similarly placed employees, subject to specific conditions.

Now, with the issuance of the latest Office Memorandum, the DoPT has institutionalised the notional increment policy. However, the memorandum clarifies that the increment will be counted solely for pension computation and not for any other pensionary entitlements.

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