“DA Hike” refers to increase in the Dearness Allowance, which is a special allowance given to government employees and retirees in India to help them cope with inflation. It’s a part of their salary and is calculated as a percentage of their basic pay. This percentage can vary depending on the rate of inflation. When filing taxes, it’s mandatory to include the DA. This allowance is provided to employees in India.
Dearness Allowance (DA) Hike
Recent news suggests that the central government might increase the Dearness Allowance (DA) for its employees by 4% from January 1. This could be announced in March and would raise the DA to 50%. The last DA increase was in October 2023, when it was raised by 4% to 46%, effective from July 1, 2023. The DA calculation method was updated in 2006 and is now based on the yearly average increase in the All India Consumer Price Index until June 2022.
Role of the 7th Pay Commission in DA Hike
The 7th Pay Commission, set up by India, suggests changes to employee salaries. It aims to update pay and allowances considering the economy and inflation. A key suggestion is calculating the Dearness Allowance based on the Consumer Price Index, which tracks cost of living changes.
Increase in Dearness Allowance
The Dearness Allowance (DA) for employees and pensioners was initially set at 42% of their basic salary or pension. The government plans to increase this to 46% to help them cope with the rising cost of living due to inflation. This increase from 42% to 46% means more money for government employees and pensioners to help them manage their expenses.
Salary Increase Due to DA Hike
The salary and pension are expected to rise by ₹3000 to ₹8000, depending on each person’s basic pay. Some might get back-payments, which are unpaid amounts from the past. The hike in DA leads to a notable monthly income boost for government employees and pensioners.
Different Types of Dearness Allowance
Variable Dearness Allowance (VAD) is a type of allowance given to Central Government employees. It’s adjusted every six months based on the Consumer Price Index (CPI) to help with inflation. VAD has three parts: a fixed DA, a base index, and the CPI. The fixed DA and base index don’t change often, but the CPI changes monthly, affecting the VAD value.
Industrial Dearness Allowance (IDA) is given to public sector employees. It’s updated every three months based on changes in the CPI.
Calculation of DA
The Dearness Allowance (DA) for public sector employees and pensioners is calculated differently for Central Government Employees and Public Sector Employees:
For Central Government Employees, the DA is calculated by taking the average of the All India Consumer Price Index (AICPI) for the last 12 months, subtracting 115.76, dividing the result by 115.76, and then multiplying by 100.
For Public Sector Employees, the DA is calculated by taking the average of the AICPI for the last 3 months, subtracting 126.33, dividing the result by 126.33, and then multiplying by 100.