The central government employees eagerly await an announcement on the Dearness Allowance (DA) hike. Most of the government employees are waiting ahead of the Diwali Festival. So read this article which will give full information about it.
What is DA?
- The government pays Dearness Allowance to its employees and pensioners to offset the impact of inflation.
- The effective salary of government employees requires constant enhancement to help them cope with increasing prices.
- Despite several measures by the government to control the rate of inflation, only partial success has been achieved because prices move according to the market.
About DA hike
- The DA (Dearness Allowance) hike refers to an increase in the allowance given to government employees to help offset inflation and rising living costs.
- The government typically announces this adjustment periodically.
How is DA calculated?
- It is calculated as a percentage of the basic salary.
- DA for Central Government employees is calculated differently than that of public sector employees.
- The formula to calculate the DA was changed in 2006 by the Government.
- DA % for Central Govt Employees = {(All-India Consumer Price Index average (Base year 2001 =100) for the last 12 months -115.76)/115.76} x 100
- DA % for Public Sector Employees = {(All-India Consumer Price Index Average (Base year 2001 =100) for the last 3 months – 126.33)/126.33} x 100
- Since DA is based on the cost of living, this salary component is not fixed. DA varies from employee to employee based on their presence in the urban, semi-urban, or rural sectors.
Taxability:
- DA is fully taxable for individuals who are salaried employees.
- It is compulsory to declare the tax liability concerning DA when filing an ITR.
Types of DA:
Variable Dearness Allowance (VDA):
- VDA applies to Central government employees.
- It undergoes revision every six months based on the changes in the Consumer Price Index (CPI).
Industrial Dearness Allowance (IDA):
- IDA applies to the Public sector employees of the Central Government.
- IDA is revised every quarter based on the changes in CPI.
Timing of DA
- Historically, the government reviews the DA in January and July but announces adjustments in March and September, aligning this year’s potential October declaration with prior trends.
- Alongside DA, Dearness Relief (DR) for pensioners is also expected to rise, further extending support to retirees who rely on the government’s timely interventions.
What is the 7th Pay Commission?
The 7th Central Pay Commission (7 CPC), constituted in February 2014 to review the principles and structure of emoluments of all central government civilian employees including defense forces in India, submitted its report on 19 November 2015.