7th pay commission: Early Diwali for govt employees — here’s how much salary may rise if DA is hiked by 4%

Amid the upcoming festive season, the Centre is likely to announce the revised Dearness Allowance (DA) and Dearness Relief (DA) for pensioners and central government employees under the 7th Pay Commission. Though there has been no official statement on the same, reports are claiming that the announcement may be made in the final week of September.

It is anticipated that the DA/DR rate will rise by 4 percent from the current 34 percent to 38 percent. After the Union Cabinet meeting, which is headed over by Prime Minister Narendra Modi, the announcement will be made.

In general, the DA/DR matter is always approved by the government.

Dearness Allowance (DA) is the cost-of-living adjustment allowance which the government pays to the employees of the public sector as well as pensioners of the same.

Dearness Relief (DR) is the same as allowance and is given to central government pensioners.

The government usually revises the DA/DR rate every six months. This is done to compensate for the loss in purchasing power of the monthly salary/pension wealth due to inflation

It is calculated as a percentage of the basic salary.

For Central Government employees: Dearness Allowance percent = ((Average of AICPI (Base Year 2001=100) for the past 12 months -115.76)/115.76) *100

AICPI stands for All India Consumer Price Index.

For public sector (central government) employees this formula is used:

Dearness Allowance percent = ((Average of AICPI (Base Year 2016=100) for the past 3 months -126.33)/126.33) *100

DA is currently 34 percent of basic. If this goes up by 4 percent, then the DA payable will become 38 percent of basic salary. Assuming a basic salary of Rs 35,000, the current DA will comes to Rs 11,900, said By Sriram V, CHRO, at BankBazaar.com.

"A 4 percent increase here would mean a revised DA of Rs 13,300. This will be an additional Rs 1,400 in hand per month," Sriram told CNBC-TV18.com.

This additional DA can help in reducing the impact of inflation.

Also, considering that the festival season is almost here, additional funds in the hands of people can also boost consumption and drive the overall economy, Sriram said.