Dearness Allowance increased by 4%, what is DA, and how to calculate it?

Digital desk: The Dearness Allowance (DA) and Dearness Relief (DR) have been approved by the Center to increase by 4%, making the overall DA for central government employees and pensioners 50% of their base pay. A 25% rise in transportation, deputation, and canteen allowances is also part of this decision.

DA is calculated using the All-India Consumer Price Index (AICPI), which reflects how the prices of everyday items change over time. The announcement, made at a news conference by Commerce Minister Piyush Goyal, is anticipated to help 67.95 lakh pensioners and 49.18 lakh employees of the central government. As per the report, it will cost the exchequer an estimated. 15,000 crore in January and February of the fiscal year 2024, taking into account both DA and DR as well as the increase in other allowances.

The modification will result in a rise in the number of allowances, including Housing Rent Allowances (HRA), Children's Education and Transport Allowances, and gratuities, based on the formula suggested by the 7th Pay Commission. Arrears for the months of January and February, as well as the updated rates for March, will be paid to employees and pensioners.

Twice a year, the Consumer Price Index - Industrial Workers (CPI-IW) is used to update the DA and DR. Usually announced shortly before Holi, the first revision takes effect on January 1st, and before Durga Puja, the second revision takes effect on July 1st. 

 

Piyush Goyal, the minister of commerce, confirmed that other allowances would rise with this revision but he did not clarify if the DA and DR hitting 50% would lead to a merger with the basic pay. Following this news, similar raises are expected for state government employees.

This is how DA is calculated, the nation is split into three HRA categories: X, Y, and Z. The updated rates for the categories X, Y, and Z are now 30%, 20%, and 10%, in that order. For example, the new HRA will be Rs.5,400, Rs.3,600, and Rs.1,800, respectively, with a minimum basic income of Rs.18,000. 

 

The transportation allowance, daily allowance, retirement gratuity, and hostel subsidies for children's schooling would all be impacted by the increase in DA. news that Chairpersons and Members of specific regulatory organizations will also profit from the DA reaching 50%, with a 25% increase in their monthly compensation.