In good news for central government employees, the Centre is expected to hike dearness allowance (DA) by 4 per cent for the six months starting January 1, 2024, according to media reports. The reports said the announcement might be made in March 2024.
The AICPI index has reached 139.1 per cent. This might led to an increase in dearness allowance for central government employees amid rising prices.
The 4 per cent DA hike, if announced by the government, will take the dearness allowance to 50 per cent, according to the reports.
In the previous DA hike in October, the government raised dearness allowance by 4 per cent to 46 per cent, effective from July 1, 2023.
What Is Dearness Allowance and Dearness Relief?
Dearness allowance is an amount given to employees as part of their salary to make up for the price rise in the economy. Whenever inflation increases, it reduces the value of a currency which, in turn, adversely affects the de facto income of the employees by hitting their purchasing power.
Dearness relief is an amount given to pensioners. Whenever DR increases, it raises the monthly pension of pensioners.
DA is given as a percentage of the basic pay, while DR is given as a percentage of the pension amount. Though the central government revises the allowances with effect from January 1 and July 1 every year, the decision is generally announced near March and September.
How DA Hike Is Calculated Under 7th Pay Commission
The central government had in 2006 revised the formula to calculate the DA and DR for central government employees and pensioners. The government now gives DA hike as per the formula for DA calculation based on the percentage increase in 12 monthly average of the All India Consumer Price Index (AICPI) for the period ending June 2022.
DA is calculated as a percentage of the basic salary.
Formula For central government employees:
Dearness Allowance per cent = ((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.
Formula For public sector (central government) employees:
Dearness Allowance per cent = ((Average of AICPI (Base Year 2016=100) for the past 3 months -126.33)/126.33) *100
How Many Employees Will Get Benefitted From 4% Hike?
The DA hike will benefit about 48.67 lakh Central Government employees and 67.95 lakh pensioners. The combined impact on the exchequer on account of both DA and DR would be Rs 12,857 crore per annum.
How Much Salary Hike Will Central Govt Employees Get?
Since the government has announced a 4 per cent DA hike, how much is the salary hike likely for central government employees? If somebody’s salary is Rs 50,000 per month and has Rs 15,000 as the basic pay. He or she currently gets Rs 6,300, which is 42 per cent of the basic pay. However, after the 4 per cent hike, the employee will get Rs 6,900 per month, which is Rs 600 higher as compared with Rs 6,300 earlier. So, if someone has a Rs 50,000 salary a month with Rs 15,000 as the basic pay, his or her salary will rise by Rs 600 per month.
In the previous DA hike in March 2023, the government had increased the dearness allowance and dearness relief by 4 per cent to 42 per cent.
Recently, various state governments, including Madhya Pradesh, Odisha, Karnataka, Jharkhand and Himachal Pradesh, increased dearness allowance for their state government employees.
DA Taxability
The dearness allowance or DA is part of your salary and, hence, the tax is levied as per your slab rate.
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