7th Pay Commission: Government will soon give New Year gift to central employees. According to media reports, the Central Government may increase Dearness Allowance (DA) by 4 percent for six months starting from January 1, 2024. Reports say that it may be announced in March 2024
7th Pay Commission: Government will soon give New Year gift to central employees. According to media reports, the Central Government may increase Dearness Allowance (DA) by 4 percent for six months starting from January 1, 2024. Reports say that it may be announced in March 2024. AICPI index has reached 139.1 percent. Amid rising prices, there may be an increase in dearness allowance for central government employees. If the government announces a 4 percent DA increase, then dearness allowance will reach 50 percent. In the last DA hike in October, the government had increased dearness allowance by 4 percent to 46 percent with effect from July 1, 2023.
What is dearness allowance and dearness relief?
Dearness allowance is money given to employees as part of their salary to compensate for increase in prices in the economy. Whenever inflation increases, it reduces the value of money. That is, it affects the purchasing power of employees. Dearness relief is money given to pensioners. Whenever DR increases, it increases the monthly pension of the pensioners.
Will be announced in March
DA is given as a percentage of basic salary, while DR is given as a percentage of pension amount. Although the central government revises the allowances every year from January 1 and July 1, the decision is generally announced around March and September.
How is DA increase calculated under 7th Pay Commission?
In 2006, the Central Government had revised the formula for calculation of DA and DR for Central Government employees and pensioners. The government now calculates DA based on the percentage increase in the 12-month average of the All India Consumer Price Index (AICPI) for the period ending June 2022.
Formula for Central Government employees:
Dearness Allowance Percentage = ((Average of AICPI (base year 2001=100) for last 12 months -115.76)/115.76) *100
Here AICPI stands for All India Consumer Price Index.
Formula for Public Sector (Central Government) employees:
Dearness Allowance Percentage = ((Average of AICPI (Base Year 2016=100) for last 3 months -126.33)/126.33) *100
How many employees will benefit from the 4% increase?
The DA increase will benefit approximately 48.67 lakh central government employees and 67.95 lakh pensioners. Due to both DA and DR, the annual impact on the government exchequer will be Rs 12,857 crore.
How much will the salaries of central government employees increase?
If the government has announced a 4 percent DA increase, then there will be an increase in the salaries of central government employees. For example, if someone’s salary is Rs 50,000 per month and his basic salary is Rs 15,000. He currently gets Rs 6,300, which is 42 percent of the basic salary. However, after the 4 percent increase, the employee will get Rs 6,900 every month. This is Rs 600 more than the earlier Rs 6,300.
In the last DA hike in March 2023, the government had increased dearness allowance and dearness relief by 4 percent to 42 percent. Recently, several state governments including Madhya Pradesh, Odisha, Karnataka, Jharkhand and Himachal Pradesh increased the dearness allowance for their state government employees.
DA will be taxable
Dearness Allowance or DA is part of your salary and hence tax is levied as per your slab rate.
