{"id":7421,"date":"2022-03-02T23:00:10","date_gmt":"2022-03-02T17:30:10","guid":{"rendered":"https:\/\/www.tickertape.in\/blog\/?p=7421"},"modified":"2022-05-24T10:42:49","modified_gmt":"2022-05-24T05:12:49","slug":"what-is-dearness-allowance","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/what-is-dearness-allowance\/","title":{"rendered":"Dearness Allowance: Meaning, Types, DA Calculation and Revised Rates"},"content":{"rendered":"\n<p>Whether you are a private sector employee or a public sector employee in India, benefits and allowances make up a considerable part of the take-home salaries. The primary goal behind this is to reduce the taxability of income. Your basic pay is decided as per the respective pay scale, and then, several components such as allowances are added to the basic pay to comprise the total salary. For public sector employees, one such allowance is the Dearness Allowance or DA.&nbsp;<\/p>\n\n\n\n<p>If you are a new public sector employee or just someone looking for information on the dearness allowance, then you have reached the right place. Here is a quick guide covering everything from what is dearness allowance to the percentage of DA for central government employees in India.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/what-is-dearness-allowance\/#What-is-a-dearness-allowance\" title=\"What is a dearness allowance?\">What is a dearness allowance?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/what-is-dearness-allowance\/#Different-types-of-dearness-allowance\" title=\"Different types of dearness allowance\">Different types of dearness allowance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/what-is-dearness-allowance\/#How-is-dearness-allowance-calculated\" title=\"How is dearness allowance calculated?\">How is dearness allowance calculated?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/blog\/what-is-dearness-allowance\/#Taxation-on-dearness-allowance\" title=\"Taxation on dearness allowance\">Taxation on dearness allowance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tickertape.in\/blog\/what-is-dearness-allowance\/#Dearness-allowance-for-retired-employees\" title=\"Dearness allowance for retired employees\">Dearness allowance for retired employees<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tickertape.in\/blog\/what-is-dearness-allowance\/#Central-government-employees-DA-hike\" title=\"Central government employees DA hike\">Central government employees DA hike<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tickertape.in\/blog\/what-is-dearness-allowance\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\" id=\"What\"><span class=\"ez-toc-section\" id=\"What-is-a-dearness-allowance\"><\/span><strong>What is a dearness allowance?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A DA is a fixed percentage of your basic pay that is added as a component in your take-home salary. The DA is aimed at balancing inflation in the cost of living and varies from employee to employee based on where you are located. If you are in a Tier I city in India, your dearness allowance would be much higher as compared to if you are in a Tier II city. In other words, it is an adjustment to your cost of living that is paid to both current and retired public sector and central government employees in India.<\/p>\n\n\n\n<p>While the DA accounts for the cost of living, it is different from a house rent allowance (HRA). The two are separate components of your salary and thus come with different <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-income-tax\/\">income tax<\/a> implications and exemptions. Moreover, both private and public sector employees get an HRA, whereas DA only applies to <a href=\"https:\/\/www.tickertape.in\/blog\/sectors-in-focus-budget\/?utm_source=blog&amp;utm_medium=article\">public sector employees<\/a>.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"Different\"><span class=\"ez-toc-section\" id=\"Different-types-of-dearness-allowance\"><\/span><strong>Different types of dearness allowance<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Dearness allowance is classified into 2 categories for the sake of easy calculation &#8211; industrial DA and variable DA.&nbsp;<\/p>\n\n\n\n<p><strong>Industrial DA<\/strong>, or IDA, is applicable if you are a public sector employee. The IDA undergoes revisions every quarter of the financial year to absorb hikes in the cost of living.&nbsp;<\/p>\n\n\n\n<p><strong>Variable DA<\/strong>, or VDA, is applicable if you are a direct employee of the central government. The VDA undergoes revisions every 6 months and is further dependent on 3 components:<\/p>\n\n\n\n<ul><li>The <a href=\"https:\/\/www.tickertape.in\/blog\/stock-market-index\/?utm_source=blog&amp;utm_medium=article\">base index<\/a> which is fixed over a longer duration.<\/li><li>Consumer price <a href=\"https:\/\/www.tickertape.in\/blog\/stock-market-index\/\">index<\/a>, which changes every month.<\/li><li>VDA amount fixed by the Government which remains the same until the government revises the minimum wages.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"How\"><span class=\"ez-toc-section\" id=\"How-is-dearness-allowance-calculated\"><\/span><strong>How is dearness allowance calculated?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Your dearness allowance is calculated twice a year to account for price rise during a financial year &#8211; January and July.<\/p>\n\n\n\n<p>DA for central government employees is calculated by the formula:<\/p>\n\n\n\n<p><strong>% of DA = {(Average of AICPI (base year &#8211; 2001 = 100) for the last 12 months &#8211; 115.76) \/ 115.76} x 100<\/strong><\/p>\n\n\n\n<p>DA for central public sector employees is calculated by the formula:<\/p>\n\n\n\n<p><strong>% of DA = {(Average of AICPI (base year &#8211; 2001 = 100) for the last 3 months &#8211; 126.33) \/ 126.33} x 100<\/strong><\/p>\n\n\n\n<p>Here, AICPI stands for All-India Consumer Price Index.<\/p>\n\n\n\n<p>In 2020, in an attempt to broaden the range of DA, the Ministry of Labour and Employment modified the formulae to incorporate the new Wage Rate Index series with the new base year as 2016 = 100. This was done on the recommendation of the International Labour Organisation.<\/p>\n\n\n\n<p>The pay commission plays a significant role in the calculation of dearness allowance in that they have the responsibility of revising your total salary basis the changes in its components.&nbsp;<\/p>\n\n\n\n<p>They consider the DA when preparing the pay <a href=\"https:\/\/www.tickertape.in\/blog\/finance-commission-101\/?utm_source=blog&amp;utm_medium=article\">commission report<\/a>. Thus, they are responsible for periodically updating the multiplication formula for the calculation of the DA.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"Taxation\"><span class=\"ez-toc-section\" id=\"Taxation-on-dearness-allowance\"><\/span><strong>Taxation on dearness allowance<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>DA in India is taxable if you are a salaried Government or public sector employee. However, if you are provided with an unfurnished no-rent accommodation, your DA will become a part of your salary up to the extent that it forms your retirement benefit salary. When filing your income tax returns, make sure to mention your DA component separately.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"Dearness\"><span class=\"ez-toc-section\" id=\"Dearness-allowance-for-retired-employees\"><\/span><strong>Dearness allowance for retired employees<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Retired employees of the central government who are eligible for a pension, either individual or family pension from the government, are also eligible for a dearness allowance as part of their retirement benefit salary. The DA of a retired employee changes every time the pay commission rolls out a new pension structure.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"Central\"><span class=\"ez-toc-section\" id=\"Central-government-employees-DA-hike\"><\/span><strong>Central government employees DA hike<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As of January 2022, the dearness allowance for central government employees and retired employees is 34%. This is a 3% hike from the 31% of 2021 and benefits over 50 lakh central government employees and over 55 lakh retired employees.<\/p>\n\n\n\n<p>Since 2006, the DA for central government employees has been growing continuously. The figure is now at 50% of your basic pay, and as a rule, DA exceeding the 50% mark is merged with the basic pay. This is done keeping all other allowances as components and thus acts as a great salary booster for you.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><strong>Conclusion<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>If you are a public sector or central government employee (or a retiree of such services), then you are eligible for a dearness allowance which is a major part of your salary. It is essentially an allowance paid as a cost of living adjustment to combat inflation. DA is fully taxable, and it is important for you to make sure to file the DA as part of your ITR to be eligible for appropriate benefits.&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Wondering what is dearness allowance (DA)? Check out this guide on DA for central government employees. Click to find out who grants it &#038; how DA is different from DR!<\/p>\n","protected":false},"author":54,"featured_media":6874,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"no","footnotes":""},"categories":[8],"tags":[1449,1447,1448,1446],"acf":[],"modified_by":null,"jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2022\/02\/9-1.png?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/7421"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/54"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=7421"}],"version-history":[{"count":4,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/7421\/revisions"}],"predecessor-version":[{"id":8540,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/7421\/revisions\/8540"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/6874"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=7421"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=7421"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=7421"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}