Dearness Allowance – Meaning, Rates, News and calculation of DA

13
12918

A Complete Overview Of Dearness Allowance

All public sector employers need to pay a basic salary to the employees as per the pay scale. There are a few other components that are calculated with respect to the basic salary and added to the DA amount and then calculated as the final salary provided to the employers. From all the components of salary, the one part is Dearness Allowance also referred to as DA.

Definition of Dearness Allowance

To deal with the impact of inflation, the government provided a dearness allowance to the employees to increase their in-hand salary which will help them in coping up with the prices increasing in the market. The government tries to do many practices so that the inflation in the market can be reduced. But due to the price increase in demand, the government fails to achieve the target. The impact of inflation depends on the location of the employee. When it comes to paying the dearness allowance to the government employees, it is calculated according to the place where the employees live. The dearness allowance for every government employee varies with respect to the residing areas based on the categorization as an urban area, semi-urban area, or rural area.

Calculation Of The Dearness Allowance

Dearness allowance is given to the employees as per their basic salary. Dearness allowance is calculated based on the inflation of the prices in the market. It is calculated twice per year i.e. January and July. The DA calculation formula was revised and changed after 2006. It is now calculated in the following methods.

Central Government Employees Calculation Method

% of DA = {(Average of the All-India Consumer Price Index (Base year -2001 =100) for the last 12 months -115.76)/115.76} x 100

Central Public Sector Employees Calculation Method

% of DA = {(Average of the All-India Consumer Price Index (Base year -2001 =100) for the last 3 months -126.33)/126.33} x 100

Dearness Allowance Treatment Under The Income Tax

The dearness allowance is fully taxable according to the salaries of government employees as per the updated norms. If in case any employee is getting unfurnished rent-free accommodation by the government, it becomes a part of that benefit up to the retirement benefits of an employee. It is given to the employees if all other pre-conditions are fulfilled.

As per the rules of the Income Tax Department, the dearness allowance amount is to be mentioned in the income tax return filed by the person. There is a separate entry made for the dearness allowance in the income tax returns.

Different Types Of Dearness Allowance:

The dearness allowance is categorized into two categories, industrial dearness allowance and variable dearness allowance.

What Is Industrial Dearness Allowance?

The industrial dearness allowance (IDA), is given to those employees, who belong to the public sector department of the central government. Industrial dearness allowance is revised every quarter as per the consumer price index to minimise the effect of inflation.

What Is Variable Dearness Allowance?

The variable dearness allowance is given to the employees of the central government. It is revised every six months as per the consumer price index to reduce the impact of inflation.

  • The base index is fixed for a particular period.
  • The consumer price index leads to an impact on the variable dearness allowance, which changes every month.
  • The variable dearness allowance is always fixed until unless the government receives it again.

How does the Pay Commission impact the calculation of DA?

The pay commission has to evaluate and analyze the changes in the DA according to the various components of the final salary of public sector employees. So, dearness allowance is calculated by the pay commission after preparing the Pay Commission report. The pay commission is responsible for considering every factor, which helps to calculate the final salary of the employees. Role of pay commission also involves periodic reviewing of multiple factors for DA calculation and updating them on a regular basis.

Pensioners Dearness Allowance

Pensioners are those people who have worked for the central government and are retired from the government service. The Dearness Allowance is given to the eligible retired central government employees individually or to the families depending upon the criteria. The changing salary structure of the pay commission is responsible for the changes in the amount of pension of the retired person. If the dearness allowance is changed after revising the final salary, then it will reflect changes in the amount of pension also.

Changes In The Dearness Allowance As Per The 2018 Budget

According to the research, it is observed that more than 50 lakh people are getting a salary from the government for their government services and around 55 lakh people are receiving a pension from the government. In the 2018 budget, the Dearness allowance was raised by around 2%. It brought many benefits for the Central government employees and raised the DA to 7% from 5%.

Difference between DA and HRA

People in general may confuse DA as similar to HRA. But there is nothing like that. DA and HRA are two separate components treated differently in the income tax department with varied rules and regulations. The HRA is given to both public and private sector employees whereas the DA is given only to the public sector employees. In addition, in HRA there are many tax exemptions which are not applicable on DA. 

What Is Merger Of Dearness Allowance?

The dearness allowance is continuously increasing for the public sector and central government employees. At present, it stands for 50% of the basic salary. The enhancement in the DA amount is the result of the unfavourable effect of inflation. It is noted that when DA crosses the 50% level then it is merged with the basic salary. If this is done, it will significantly impact the salary hike, as most of the components are calculated based on the basic salary. This is a wise step taken by the government in the welfare of the employees.  

 

13 COMMENTS

  1. Greetings! Very useful advice in this particular post!
    It’s the little changes that produce the biggest changes.
    Thanks for sharing! It is perfect time to make a few plans for the
    long run and it’s time to be happy. I’ve read this post and if I could I desire to suggest you some attention-grabbing issues or advice.
    Maybe you can write subsequent articles referring
    to this article. I wish to read even more things
    about it! I’ll immediately grab your rss feed as I can not in finding your email subscription hyperlink
    or e-newsletter service. Do you have any? Kindly allow me know in order that I may just subscribe.
    Thanks.

  2. Thank you for sharing superb informations. Your web-site is so cool.
    I am impressed by the details that you’ve on this web site.
    It reveals how nicely you understand this subject.
    Bookmarked this web page, will come back for extra articles.
    You, my pal, ROCK! I found simply the information I already searched
    everywhere and just couldn’t come across. What a perfect site.

  3. fantastic publish, very informative. I ponder why
    the other experts of this sector don’t notice
    this. You must continue your writing. I am confident, you’ve a huge readers’ base already!

  4. I see something truly interesting about your site so I
    saved to favorites.

  5. My brother recommended I might like this website.
    He was totally right. This post truly made my day.
    You can not imagine simply how much time I had spent for this info!
    Thanks!

  6. Everything is very open with a clear clarification of the challenges.
    It was really informative. Your website is extremely helpful.

    Many thanks for sharing!

  7. Hello my family member! I wish to say that this article is awesome,
    great written and come with almost all vital infos. I’d like to peer extra posts like this.

  8. Greetings! This is my first visit to your blog!
    We are a group of volunteers and starting a new initiative in a community in the
    same niche. Your blog provided us useful information to work on. You have done a extraordinary job!

  9. You are so awesome! I do not think I have read
    a single thing like this before. So nice to find somebody with
    a few original thoughts on this topic. Seriously..
    thanks for starting this up. This website is one thing that is needed on the internet, someone with
    a little originality!

  10. It’s hard to find educated people for this subject, but you seem like you know what you’re talking about!
    Thanks

  11. Hello friends, how is everything, and what you would like to say on the topic of this paragraph, in my view
    its in fact remarkable in support of me.

  12. This is very interesting, You are a very skilled blogger. I’ve joined your rss feed and look
    forward to seeking more of your wonderful post. Also,
    I’ve shared your web site in my social networks!

  13. You are so cool! I do not think I have read something like that before. So great to discover someone with some genuine thoughts on this issue. Seriously.. many thanks for starting this up. This web site is something that is needed on the internet, someone with a bit of originality!

LEAVE A REPLY

Please enter your comment!
Please enter your name here