Ahead of New Year, Odisha Chief Minister Naveen Patnaik on Friday declared a 4 percent hike in Dearness Allowance (DA) for state government employees and pensioners under 7th Pay Commission. The hike in DA will be effective retrospectively from July 1, 2022, the official notification read.
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.
The government usually revises the DA rate every six months. This is done to compensate for the loss in purchasing power of the monthly salary/pension wealth due to inflation.
This is done to compensate for the loss in purchasing power of the monthly salary/pension wealth due to inflation.
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
How is DA different from house rent allowance (HRA)?
DA is calculated as a specific percentage of the basic salary, which is then added to the basic salary along with other components like HRA.
HRA, meanwhile, is the salary component given by an employer to an employee to meet expenses related to the renting of accommodation. This applies to both private and public sector employees.
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.
