Central employees and pensioners are still waiting for their Dearness Allowance (DA) and Dearness Relief (DR). There is a discussion regarding the payment of Dearness Allowance pending for a long time. But, in the meeting held with the cabinet secretary, nothing special was announced for the employees. However, it is expected that soon lakhs of central employees and pensioners can get big relief. Today we are telling you the important things related to DA…
What is Dearness Allowance (DA)?
Dearness allowance is such money, which is given to government employees to improve their cost of living. This money is given so that even after rising inflation, there is no difference in the standard of living of the employee. This money is given to government employees, public sector employees and pensioners. It started during the Second World War. At that time, this money was given to the soldiers apart from the salary for food and other facilities. At that time it was called Food Dearness Allowance or Dearness Food Allowance. Dearness Allowance was first introduced in India in 1972 from Mumbai. After this, the Central Government started giving dearness allowance to all the government employees.
How is Dearness Allowance calculated?
There is a formula for calculating dearness allowance. The formula for central employees is [(Average of All India Consumer Price Index (AICPI) for last 12 months – 115.76/115.76]×100. Now if we talk about Dearness Allowance of people working in PSU (Public Sector Units), then the method of its calculation is- Dearness Allowance Percentage = (Average of Consumer Price Index of last 3 months (Base Year 2001=100)- 126.33))x100
What is AICPI?
There are two types of inflation in India. One is retail ie retail and the other is wholesale inflation. Retail inflation rate is based on the prices offered by ordinary customers. It is also called Consumer Price Index (CPI).
How much will be the benefit?
For salary calculation under 7th Pay Commission (7th Pay Commission Salary hike), DA has to be calculated on the basic salary of the employee. Suppose someone’s basic salary (minimum salary) is Rs 25,000, then his DA will increase by 28% of 25,000. This means that the increase in DA will be 11% of Rs 25,000 i.e. total Rs 2750. Similarly, the salary of other central employees will also be different in the 7th CPC Pay Matrix. It can be calculated by looking at your basic salary.
Do you have to pay tax on dearness allowance also?
Dearness Allowance is fully taxable. Under the Income Tax rules in India, separate information about dearness allowance has to be given in the income tax return. Meaning the amount you get in the name of dearness allowance is taxable and tax will have to be paid on it.
There are two types of dearness allowance
There are two types of dearness allowance. First Industrial Dearness Allowance and second Variable Dearness Allowance. The Industrial Dearness Allowance is revised every 3 months. This is for the employees working in the public sector of the central government. It is calculated on the basis of Consumer Price Index (CPI). The Variable Dearness Allowance is revised every 6 months. Variable Dearness Allowance is also calculated on the basis of Consumer Price Index (CPI).
How much can DA increase?
DA has increased by 4% in January 2020, 3% in June 2020 and 4% in January 2021. Soon the freeze on DA from last year may be removed. After that it will be decided to implement it. However, it is not clear when this will happen. About 50 lakh central employees and 65 lakh pensioners will get the benefit.
