Dearness Allowance (DA) Hike Expected for Central Government Employees and Pensioners
The central government is likely to increase the dearness allowance (DA) for over one crore employees and pensioners by 4 percentage points to 42% from the existing 38%, effective January 1, 2023. A similar increase in Dearness Relief (DR) for central government pensioners is also expected.
What is Dearness Allowance (DA) and Dearness Relief (DR)?
Dearness Allowance (DA) is a cost-of-living adjustment allowance paid by the government to public sector employees and pensioners. Dearness Relief (DR) is a similar allowance given to central government pensioners.
Estimated Salary Increase for Employees
Assuming a basic salary of Rs 18,000 under level 1 of the 1800 grade pay scale, the DA would come to Rs 7,560, an additional Rs 720 per month. At 38% DA, the allowance is approximately Rs 6,840.
Calculating Dearness Allowance (DA)
The dearness allowance is calculated using the formula:
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 the calculation of DA means the salary as per the applicable Level in the Pay Matrix, excluding any other emoluments such as special pay, etc.
Frequency of DA/DR Revision
The government usually revises the DA/DR rate every six months to compensate for the loss in purchasing power of the monthly salary/pension due to inflation.
Previous DA Hike
The last revision in DA was done on September 28, 2022, effective from July 1, 2022, increasing the allowance by 4 percentage points to 38% based on the percentage increase in the 12-month average of the All India Consumer Price Index for the period ending June 2022.
Determining the DA Hike
The dearness allowance for employees and pensioners is calculated based on the latest Consumer Price Index for Industrial Workers (CPI-IW) released by the Labour Bureau, a wing of the Labour Ministry. As per PTI, the CPI-IW for December 2022 was released on January 31, 2023, with a 4.23% dearness allowance hike. However, the government does not factor in DA hikes beyond decimal points, leading to a likely increase of 4 percentage points to 42%.
Taxation of DA
The DA paid to employees is fully taxable with salary, and the Income Tax Act mandates that tax liability for DA and salary must be declared in the filed return.Facebook or follow us on Twitter and Instagram. Subscribe us on Telegram and never miss a update!
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