7th Pay Commission: How to calculated DA (Dearness Allowance) after the new hike

Publish Date: 15 Jul, 2021 |
 

Dearness Allowance Hike:

The Government of India has recently decided to hike the Dearness Allowance (DA) for the central government employees from its existing rate i.e., 17% by 11%, hence, the Dearness Allowance will now be paid at 28% with effect from 1st July 2021. Moreover, the Dearness Relief payable to the central government pensioners, which was earlier discontinued has been resumed once again.

It must be noted that the central government citing the Covid-19 pandemic decided to discontinue the Dearness Allowance (DA) and Dearness Relief (DR) from 1st January 2020. 

While the DA and DR installments are now due for four periods now namely, 1st January 2020, 1st July 2020, 1st January 2021, 1st July 2021.

So, in this article further, let’s know more about what is Dearness Allowance (DA) and how is the Dearness Allowance (DA) calculated?

What is Dearness Allowance (DA): 

Dearness Allowance means the cost of living adjustment allowance which the government pays to the employees of the public sector as well as pensioners after their retirement from the public sector jobs. This amount is paid according to the rate of inflation in the country and is paid to adjust to the inflation in the market. 

The rate of Dearness Allowance payable to employees is increased from time to time.

Calculation of Dearness Allowance (DA):

The DA component was introduced by the government after the Second World War, and since 2006, the formulae to calculate dearness allowance has altered. So, the formulae mentioned below shares insight into how to calculate Dearness Allowance (DA):

  • For Central Government Employees: 

Dearness Allowance % = ((Average of AICPI (Base Year 2001=100) for the past 12 months -115.76)/115.76)*100

  • For Central Public Sector Employees:

Dearness Allowance % = ((Average of AICPI (Base Year 2001=100) for the past 3 months -126.33)/126.33)*100

Here, AICPI stands for the All-India Consumer Price Index.

It must be noted that from the year 1996, DA has been included to compensate for the price rise or inflation.


 

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