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The monthly magazine, August 2026 · Social Issues › Reservation and creamy layer

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OBC creamy layer: the income test stuck between ministries

LeadPrelims and Mains29 Aug 2026

Why in news

  • On 29 August 2026 the chairman of the Parliamentary Standing Committee on the Welfare of Other Backward Classes said that the question of how the creamy layer income test should be applied "seems stuck" between the Ministry of Personnel and the Ministry of Social Justice and Empowerment, each passing the job to the other.
  • The Supreme Court had held in March that a parent's salary from a public sector undertaking or a private company cannot by itself put a candidate in the creamy layer, and in August the Union told the Court that fixing which posts outside government are equivalent to which government posts could take two years; candidates who cleared the Civil Services Examination wait meanwhile.
Dholpur House, the Union Public Service Commission. Candidates who cleared the Civil Services Examination wait on the creamy layer decision
Dholpur House, the Union Public Service Commission. Candidates who cleared the Civil Services Examination wait on the creamy layer decisionPhoto: Ramesh lalwani, Wikimedia Commons, CC BY-SA 4.0
  • ₹8 lakh a yearthe gross family income above which a candidate falls in the creamy layer, fixed by the Union Cabinet on 30 August 2017, up from ₹6 lakh
  • Six monthsthe time the Supreme Court gave in March 2026 to reconsider the affected candidates' claims
  • Up to two yearsthe Union's estimate, given to the Court in August, for fixing equivalence of posts in all State public sector undertakings
  • 27 per centthe reservation for the Other Backward Classes in central recruitment since Indra Sawhney (1992)

Background

  • The creamy layer is the socially and economically advanced section of a backward class, which is excluded from reservation so that the benefit reaches those still behind. The Supreme Court made the exclusion a condition of OBC reservation in Indra Sawhney v. Union of India (1992), and the Department of Personnel and Training laid down the test in an Office Memorandum of 8 September 1993.
  • The 1993 test is built on status, not income. The children of constitutional office holders, of Group A officers, of Group B officers who reach Group A before 40, of colonels and above, and of holders of equivalent posts in public undertakings, banks, universities and the private sector are excluded. The income and wealth test, income above the ceiling for three consecutive years, was meant for those outside the service categories.
  • The ceiling has been raised with prices: ₹1 lakh in 1993, ₹2.5 lakh in 2004, ₹4.5 lakh in 2008, ₹6 lakh in 2013 and ₹8 lakh in 2017, when the Cabinet also set up a commission under Article 340 to sub categorise the OBCs.
  • The Department's clarification of 2004 said that income from salary and from agriculture is not to be clubbed to reach the ceiling. A letter of the same year, which the Department later relied on, allowed salary alone to decide the matter where no equivalence of posts had been fixed, and that reading is what the Court rejected in March.
The creamy layer test: status first, income second How the 1993 test works, where it broke, and what the Supreme Court held in March 2026 An OBC candidate claims reservation: is the family in the creamy layer? Step 1: the status test (1993 Office Memorandum) Excluded: children of constitutional office holders, Group A officers, Group B officers who reach Group A before 40, colonels and above. And of holders of equivalent posts in public undertakings, banks, universities and the private sector. Group C and D employees are never excluded by rank. Step 2: equivalence of posts The rank outside government is matched to a government rank before the status test is applied. For most undertakings no equivalence has been notified in 33 years. The Union told the Court in August 2026 that fixing it could take two years. Step 3: the income and wealth test Gross annual income above ₹8 lakh for three consecutive years (₹1 lakh in 1993; ₹8 lakh since 30 August 2017). Meant for families outside the service categories. Salary and agricultural income are not to be clubbed (2004 clarification). What went wrong, and the March 2026 ruling With no equivalence, the Department read a parent's public sector salary above ₹8 lakh as creamy layer. The Supreme Court (Justices Narasimha and Mahadevan): the test is status based; income is only supplementary; salary alone cannot exclude. Claims to be reconsidered in six months. Where it stands 29 August 2026: the Standing Committee chair says the policy on equivalence and the income test is "stuck" between the Personnel and Social Justice ministries.
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How the test came apart

  • The Department of Personnel and Training treated candidates who had cleared the Civil Services Examination as creamy layer because their parents' salaries from public sector undertakings and banks crossed ₹8 lakh; no equivalence with government ranks had ever been notified for those posts, so income alone decided. The Central Administrative Tribunal and several High Courts ruled for the candidates, and the Union appealed.
  • In March 2026 a bench of Justices P.S. Narasimha and R. Mahadevan dismissed the appeals. The 1993 memorandum is a status based scheme, it held, and income is only a supplementary test where equivalence has not been fixed; salary, agricultural and other income cannot be mechanically added to reach the ceiling. To exclude the child of a public sector clerk because her salary crossed ₹8 lakh, while the child of a Group C government employee on the same pay stays in, would be unequal and unconstitutional.
  • The Court directed that the candidates' claims be reconsidered within six months, with supernumerary posts if need be.

The committee's view

  • The Standing Committee has asked the Social Justice Ministry to identify equivalent posts in public bodies, since its failure to do so sends OBC candidates to court, and has recommended that only income from sources other than salary and agriculture count toward the ceiling, with all Group C employees kept in.
  • Its chairman's remark of 29 August is about the next step: a policy on equivalence and the income test, drafted by the Social Justice Ministry on the Court's reading, for the Cabinet. Neither ministry has produced it.

Why it matters

  • A test that reads a clerk's salary as advancement excludes exactly the first generation that the policy exists to lift; the gap between two ministries leaves selected candidates neither appointed nor rejected for years.
  • The same question, whether income can measure a social disadvantage, is before the Court for the Scheduled Castes and Scheduled Tribes, where the Centre's August affidavit answers no; the two positions have to be read together.

Analysis

  • The judgment restored the design of 1993 against the convenience of 2004. The design was that office and rank, not pay, show that a family has left backwardness behind; the income test was a stopgap for people with no rank to compare.
  • A stopgap became the rule. Twenty years of not notifying equivalences turned the income test into the default, and the default into a way of excluding the children of bank clerks.
  • The burden now sits where it belongs, on the government to fix equivalences; its answer of two years and more shows why the work was never done, since it is tedious and offends somebody in every ministry.
  • The honest Mains argument: the test is overdue for a single published code, with equivalence tables for the large employers and a plain rule that salary alone never excludes.
  • A Cabinet decision can unstick it in a day. A question that is "stuck between ministries" is a question of will, not of law.

The way forward

  • A single Office Memorandum, approved by the Cabinet, that writes the March judgment into the test: status first, income only for those outside the service categories, salary and agricultural income never counted.
  • Equivalence tables for central and State public sector undertakings, banks and insurers within a fixed time, and a default rule for the private sector until they exist.
  • Decide the pending Civil Services cases within the Court's six months and publish the outcome.

Schemes to know

PM YASASVI (Pradhan Mantri Young Achievers Scholarship Award Scheme for Vibrant India, from 2021-22, Ministry of Social Justice and Empowerment)

  • The umbrella scholarship for OBC, Economically Backward Class and Denotified Tribe students, with pre matric, post matric, top class school and college, and hostel components.
  • Family income ceiling ₹2.5 lakh a year.
  • The post matric part reached about 28 lakh students in 2023-24.

National Commission for Backward Classes (constitutional body under Article 338B since the 102nd Amendment, 2018)

  • Has the powers of a civil court in its inquiries.
  • Must be consulted on every major policy affecting the backward classes.

Exam lens

  • Prelims: Indra Sawhney (1992): 27 per cent for OBCs, the creamy layer excluded, the 50 per cent ceiling; the 1993 Office Memorandum's status test; the income ceiling ₹8 lakh since the Cabinet decision of 30 August 2017; salary and agricultural income not counted; Article 338B (102nd Amendment, 2018) for the National Commission for Backward Classes; Article 340 for a commission on backward classes.
  • Mains: "The creamy layer was designed as a test of status, but has been applied as a test of income." Examine, in the light of the Supreme Court's 2026 judgment, how the test should be applied to the children of public sector and private employees.

Asked before: Mains 2022 GS2 · Prelims 2023

Show the questions
  1. Mains 2022 GS2: Discuss the role of the National Commission for Backward Classes in the wake of its transformation from a statutory body to a constitutional body.
  2. Prelims 2023: Consider the following organizations/bodies in India: 1. The National Commission for Backward Classes 2. The National Human Rights Commission 3. The National Law Commission 4. The National Consumer Disputes Redressal Commission. How many of the above are constitutional bodies?

Cases to cite

  • Indra Sawhney v. Union of India (1992): OBC reservation upheld at 27 per cent, subject to the exclusion of the creamy layer.
  • Jarnail Singh v. Lachhmi Narain Gupta (2018): the creamy layer principle applies to Scheduled Castes and Scheduled Tribes in promotions.
  • The creamy layer appeals of March 2026 (Justices P.S. Narasimha and R. Mahadevan): salary alone cannot decide creamy layer status; the 1993 test is status based, and income only supplementary.

Connects to

Sources
  • The Wire, 29 August 2026, “House panel chief says OBC creamy layer income test issue stuck between two ministries: report”
  • Business Standard, 13 March 2026, “Creamy layer in OBC quota cannot be decided solely on parents' income: SC”
  • PRS Legislative Research, “Rationalisation of Creamy Layer in Employment for OBCs”
  • PMIndia, 30 August 2017
  • PIB, 23 October 2024

Settled facts (dates of Acts, constitutional provisions, standing definitions) are from standard references.

Filed under: Reservation and creamy layer · The monthly magazine, August 2026