The central government is likely to increase dearness allowance (DA) under 7th Pay Commission for its over one crore employees and pensioners by four percentage points to 42 percent from existing 38 percent. The same, if done, will be effective from January 1, 2023. The announcement of the Dearness Relief (DR) hike for central government pensioners is also expected.
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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. On the other hand, dearness relief (DR) is the same as allowance and is given to central government pensioners.
So, how much will salary increase if the hike is done?
DA is currently 38 percent of basic. If this goes up by 4 percent, then the DA payable will become 42 percent of basic salary. Assuming a basic salary of Rs 18,000, under level 1 of 1800 grade pay scale, the DA will come to Rs 7,560. This will be an additional Rs 720 in hand per month.
Notably, at 38 percent, the dearness allowance comes around to Rs 6,840.
Others can calculate their rise from the given formula:
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.
Dearness Allowance percent = ((Average of AICPI (Base Year 2016=100) for the past 3 months -126.33)/126.33) *100
The term ‘Basic Pay’, for calculation of DA, in the new structure means the salary drawn as per the applicable Level in the Pay Matrix as prescribed by the 7th Pay Commission recommendations accepted by the government. Basic Pay excludes any other emoluments, such as special pay etc.
Why govt revises DA/DR?
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.
When was the last hike in DA done?
Last revision in DA was done on September 28, 2022, which was effective from July 1, 2022. The Centre had increased DA by four percentage points to 38 percent based on the percentage increase in 12 monthly average of All India Consumer Price Index for the period ending June, 2022.
How is DA hike determined?
The dearness allowance for employees and pensioners are worked out on the basis of the latest Consumer Price Index for Industrial Workers (CPI-IW) brought out by the Labour Bureau every month. The Labour Bureau is a wing of the Labour Ministry.
According to news agency PTI, the CPI-IW for December 2022 was released on January 31, 2023. The dearness allowance hike, there, works out to be 4.23 percent. But the government does not factor in hiking DA beyond decimal point. Thus DA is likely to be increased by four percentage points to 42 percent, All India Railwaymen Federation, General Secretary, Shiva Gopal Mishra was quoted as saying in the report.
Is DA/DR taxable?
DA paid to employees is fully taxable with salary. The Income Tax Act mandates that tax liability for DA and salary must be declared in the filed return.
First Published: Feb 6, 2023 4:10 PM IST
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