What is da in government?
Dearness Allowance, sometimes known as DA, was first introduced during World War II under the name “Dear Food Allowance.” As a result of the initial demand for salary adjustment, the government initially paid employees a Dearness Allowance. It is a sum of money raised to a person’s base salary (a rate of pay agreed upon between the employer and the employee but excludes overtime or any other additional compensation) or pension as a result of increasing costs and inflation in a country.
Dearness Allowance(DA) is an additional payment made to employees as a cost of living adjustment to compensate for inflation. It is typically expressed as a percentage of the employee’s basic salary. The purpose of DA is to help employees maintain their purchasing power and standard of living when the cost of living increases due to inflation.
The dearness allowances are the costs that the central government covers for the standard of living of its employees. It indicates that employees of the central government or any other public sector organisation will be eligible to receive dearness allowances. According to the employee’s wage, the DA is paid according to the salary receipt of the employee. Additionally, an employee’s DA is determined by whether they live in an urban or rural location.
The 7thPay Commission was established on 08 February 2014. Every ten years, the Central Government creates a Pay Commission to update the pay scale for its employees. The central government provides this to the workers to preserve their living standards. Therefore, employees who central government offices employ are eligible for DA benefits.
This Pay Commission has increased the minimum wage from ₹7,000 to ₹18,000 per month. The entry-level wages will now be ₹18,000. (for newly recruited). A newly hired class 1 officer, however, will cost 56,100. This wage structure displays a compression ratio of 1:3.12, indicating that a class 1 officer will be paid three times more than an entry-level employee.
Rates of Dearness Allowance
The DA rates are determined based on the government employee’s compensation. A portion of the compensation has covered the employee’s cost of living.
According to the 6th Pay Commission, the rate was 113% in January 2015 and climbed to 119% in July 2015. The Dearness Allowance Rates reached a peak of 125% in January 2016. This translates to a 6% rate increase for central government employees.
The DA was established following World War II. After a few revisions, the rules and regulations surrounding the dearness allowance were ultimately implemented in 1972.
Every service officer covered by the All India Service Act, 1951, is entitled to a specific portion of their basic salary as a dearness allowance.
The rules provide that those who work for government agencies have a fixed basic wage under
A person must be employed by one of the three governments—India, Bangladesh, or Pakistan—to qualify for DA. People who work for organisations in the public sector are also suitable for the DA.
The DA rate for central government employees is 125%, 6% more than the previous rate of 119%. The rules and fees for DA have been set since 1972. Since that time, the rates have been changing every six months. The rate for the central government was established at 113% in January 2015, and then in the second half of the same year, it increased to 119%. For central government employees this year, the rates increased by 6% in January and reached 125%.
One of the primary components of the 7th Pay Commission is the fit factor. In this case, a relevant factor of 2.57 will be used for all Pay Matrices levels. After taking DA into account, government employees’ or retirees’ salaries or pensions will increase by at least 14.29% as of 01 January 2016.
To calculate your Dearness Allowance, you will need the following information:
DA is based on CPI points for bank employees. The DA decreased by 1% in December 2015. On the other hand, bank employee DA had increased by 2.8% the year before. The CPI readings for January, February, and March of 2016 had already been released, and the analytics predicts May’s anticipated decline in DA.
Conclusion
The Dearness Allowance (DA) is a calculation on inflation and allowance paid to government employees (including public sector unit employees as public sector unit employees are also government employees) and pensioners in India, Bangladesh and Pakistan.
Dearness Allowance is calculated as a percentage of an Indian citizen's basic salary to mitigate the impact of inflation on people. Indian citizens may receive a basic salary or pension that is then supplemented by a housing or a dearness allowance, or both. The guidelines that govern the Dearness Allowance vary according to where one lives. Dearness Allowance is a fully taxable allowance. The two types of Dearness Allowance are:
The Dearness Allowance was introduced following the second World War, and was then known as the "Dear Food Allowance". The "Old Textile Allowance" was also introduced in 1947, though this was revised and reintroduced in 1953 as the "Revised Textile Allowance". Initially DA was given in response to demand of employees for wage revisio. Later it was linked to Consumer Price Index. In the past various committees have been constituted to look into the issue of payment of D.A. to Central Government employees. The III Central Pay Commission recommended payment of DA whenever the CPI rose by 8 points over the index of 200 (with base 1960 = 100). The extent of neutralisation granted with effect from 1-1-1973 ranged from 100% to 35%. The IV Central Pay Commission recommended the grant of DA on a 'percentage system' of the basic pay (1986).It also recommended payment of DA twice a year; 1 January and 1 July.Each instalment of DA was to be calculated with reference to the percentage increase in the 12 monthly average of All India Consumer Price Index (base 1960). The extent of neutralisation now ranged from 100% to 65%. The V Central Pay Commission looked into the issue of differential neutralisation and found it to be injustice to senior officers and recommended uniform neutralization of 100% to employees at all levels. The Commission had suggested that dearness allowance should be converted into dearness pay every time the cost of living rises by 50% over the base level. The VI Central Pay Commission recommended revision of base year of the Consumer Price Index (CPI) as frequently as feasible.It also changed base year for DA calculation to 2001 (base year 2001=100)
Formula for calculating Dearness Allowance for Central government employees after 1.1.2006 is :
Dearness Allowance %= {(Average of AICPI(Base year 2001=100) for the past 12 months – 115.77)/115.77}*100
In October 2021, the government revised the Consumer Price Index-IW base year from 2001 to 2016. A linking factor of 2.88 was defined for converting the new series with the base 2016=100 to the previous series on base 2001=100. Based on this, the DA is currently calculated with the following formula
DA = (A – 261.4)*100/(261.4) Where A = Avg of CPI-IW (base 2016=100) for the past 12 months x linking factor of 2.88
Formula for calculating Dearness Allowance for Central public sector employees after 1.1.2007 is :
Dearness Allowance %= {(Average of AICPI(Base year 2001=100) for the past 3 months - 126.33)/126.33}*100
Dearness allowance with effect from January or July of a particular year in the future, once the AICPI(IW) for a particular month is published by the Government, whereas for PSU employees it is declared quarterly by DPE (Department of Public Enterprise).
Beginning 1 January 1996, the Dearness Allowance is granted to compensate for price increases to which the revised pay scales relate. This will be reviewed twice a year, on 1 January and 1 July.
The following table shows All India Consumer Price Index since 1.1.2006 with Base year 2001=100
The DA Rate for Industrial Workers (since 1.1.2007 with Base year 2001=100) for 3rd Quarter (Sep-Dec), 2015 has been declared as 107.9% and that of 4th Quarter (Jan-Mar), 2016 is 112.40%.
The Vth Pay Commission recommendations were implemented since 1.1.1996 and consequently DA rate wef 1.1.1996 became 0. Further in 1994 Central Government merged 50% of the Dearness Allowance (DA) with the basic pay w.e.f. 01.04.2004 and the Dearness Allowance continued to be calculated with reference to the AICPI (IW) average as on 1 January 1996 of 306.33 without changing the index base consequent to the merger. Accordingly, Dearness Allowance (DA) as mentioned in table below were sanctioned from 01.07.2004 till 01.07.2007.
DA rate as applicable after implementation of VIth Pay Commission recommendations wef from 1.1.2006 is shown in table below :-
DA rate as applicable after implementation of VIIth Pay Commission recommendations wef from 1.1.2016 is shown in table below :-
Print media workers
For print media workers the Government of India has notified a DA Formula in the Gazette No 2532(E) of Nov 11, 2011, as recommended by the Majithia Wage Board for Journalists and Non-Journalists. The said Gazette notified formula was subsequently upheld by the Supreme Court of India by its judgment made on Feb 7, 2014. The Hon. Supreme Court upheld the recommendations as 'revised and determined' by Hon Justice (retd) Majithia. While 115.76 is the Base and Divisor for Central Government staff, for employees coming under Majithia Wage Board 167 had been recommended as Base and Divisor. The said 167 is the 12-month average of July 1, 2009 to June 30, 2010.
The average for the current DA period January to December 2017 is 274, which is the 12-month average AICPI-IW of Jan 1, 2016 to December 31, 2016. The DA calculation for Jan 2017 to June 2017 is 274 minus 167 * Bas ic Pay and the result divided by 167. Total points 107.
Dearness allowance rate applicable after implementation of 7th Pay Commission recommendations wef from 1.1.2016 as shown in above table. Accordingly the Nodal Authority Department of Expenditure, Ministry of Finance, Govt of India has issued the Office Memorandum as shown below:-
Both pensioners and their families are granted DA and this continues following reemployment with the Central or State Government, a Government undertaking, an autonomous body or a local body; that is, DA is allowed in addition to a recipient's fixed pay or "time scale". In other cases of reemployment, access to DA is subject to the limit of emoluments last drawn.
DA is not allowed during a pensioner's time overseas if employment is undertaken. It remains accessible to overseas pensioners whilst the recipient is not employed.
From 1 October 1984 to date, pensioners are paid DA at a certain percentage of basic pension. The allowance is calculated on the original pension without commutation. From 1 July 1986 the percentage has been revised every six months based on the cost of living index .72 to 80 DA may be allowance.
DA Calculator for PSU employees DA Calculator for CG employees
Time Interval for revision of dearness allowance
Since DA is based on the cost of living, this salary component is not fixed. It varies from one public sector employee to another based on his/her location. Hence, DA allowance is different for employees in the rural, urban, and semi-urban sectors.
DA rates are subject to change twice every year. This allowance is increased by the Government every six months. Usually, the change is introduced on January 1st for the timeframe between January up to the month of June, and on July 1st for the period ranging from July to the month of December.
These are the different types of dearness allowances that are offered by the Indian Government:
VAD is a type of DA that is paid to Central Government employees. It undergoes revision every six months based on the changes in the Consumer Price Index (CPI) to mitigate inflation. VAD mainly comprises three elements- variable DA that remains fixed, base index, and CPI.
The first component of VAD stays fixed until the government increases or decreases the basic minimum wages. Likewise, the base index also remains fixed for a specific timeframe. However, the CPI changes every month and thus has an effect on the value of VAD.
This is the allowance that is offered to public sector employees by the Government. IDA is revised every quarter based on the changes in CPI.
Previously referred to as “Dear Food Allowance”, dearness allowance was introduced after the Second World War. However, after 2006, changes were made in its calculation. It is presently calculated as a particular percentage of basic salary.
DA is added to the basic salary along with other components such as House Rent Allowance (HRA), Conveyance Allowance, and more to form the total salary.
This is how DA in salary is calculated for public sector employees and pensioners:
DA% = x 100
DA% = x 100
Here, AICPI means All-India Consumer Price Index.
Whenever a pay commission introduces a new salary structure, the pension for retired public-sector employees is revised. When DA increases, the corresponding surge is reflected in the retired public sector employees’ pension. This applies to both family and regular pension.
When pensioners are re-employed, they cannot get DA if it is granted on a fixed pay or time scale. However, in some other cases, re-employed pensioners may get DA which is limited to their last drawn pay.
Dearness allowance is not paid to pensioners if they are residing in a foreign country during re-employment. Nevertheless, pensioners who reside abroad without being re-employed are eligible for DA on their pension.
As per the provisions of the Income Tax Act 1961, there is a full incidence of tax on salaried employees. Suppose a salaried employee gets rent-free accommodation from his or her employer where all the previously mentioned conditions are met. In that case, DA becomes a part of the salary up to which it becomes a retirement benefit salary component.
The Income Tax Act has made it compulsory for individuals to declare their tax liabilities concerning DA while filing their tax returns.
DA and HRA must not be confused with each other as both are separate components of an employee’s salary structure. Given below is a tabular representation pointing out the dissimilarities between the two.
The Indian Government set up the pay commission to assess and revise the salaries of public sector employees. Various salary components, such as dearness allowance that form an employee’s total salary, are taken into account to bring in changes.
Purpose: DA is a cost-of-living adjustment that is offered to public sector employees by the Government to curb the effect of inflation. In contrast, HRA is meant to assist employees in fulfilling their housing requirements by providing a component of their salary to pay for rental accommodation.
