Giving relief to over 52 central government employees, the government is likely to make the final call about the payment of the dearness allowance (DA) arrears after meeting between the officials of the Union finance ministry, National Council of Joint Consultative Machinery and the department of personnel and training today. The confusion regarding the arrear payment is expected to be cleared after today’s decision, according to Zee Business. So in all probability DA is going to be a keyword that you will be hearing in the upcoming days, so what exactly is DA?
Read more: DA Resumption, Arrears for Central Govt Employees from July? Know What Govt Says
Dearness Allowance or DA is paid by the government to its employees as well the pensioners as cushion allowance to meet their day to day monetary demands in price rise due to inflation. The quantum of DA varies from employee to employee depending upon their pay scale or based on their presence in the urban, semi-urban or rural sector.
What is the current DA rate?
Prior to this latest revision in DA under the provisions of the 7th pay commission, central government employees were entitled to get a DA of 17 per cent that has been in effect since July 2019. The government introduced a revision of 4 per cent in January 2020 which has now taken the DA to 21 per cent. However, the revision plans were kept on hold because of the effects of the COVID-19 pandemic and the government said the benefits of the revision will be resumed from July 1.
How is DA calculated?
The rate of DA is calculated twice a year – in January and July and the formula to calculate DA was last changed in 2006. According to Clear Tax, the government adopts two different formulas for calculation DA for central government employees and DA for Central Public Sector Employees
For Central Government Employees the DA calculation formula is:
Percent 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
For Employees of Central Public sector
% 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
Types and Taxes on Dearness Allowance.
DAs are divided into two broad categories – industrial dearness allowance and variable dearness allowance. The industrial dearness allowance is revised quarterly and depend on the Consumer Price Index (CPI) to help employees to cope up with the rising prices of commodities in inflation. It is applicable for the public sector employees of the Central government
The Variable dearness allowance (VDA) on the other hand is applicable for central government employees and is revised every 6 months.
Meanwhile, DA is fully taxable for salaried employees under the provisions of the income tax department.
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