It, therefore, becomes essential for the government to shield its employees from the adverse effects of inflation. Therefore, DA is also considered by the Pay Commissions while preparing the subsequent pay commission report. Every time a new salary structure is rolled out by a pay commission, the pension for retired employees of the public sector is also revised. Near about 50 lakh government employees and 65 lakh pensioners will now be benefitted with the recent hike in Dearness Allowance (DA) which has been announced by the Government of India. How to Calculate Dearness Allowance for Central Government Employees and Pensioners after implementation of 7th Pay Commission and introduction new Consumer Price Index with base 2016=100? 7th Pay Commission 7th Pay Commission latest update: Big changes likely in Salary, DA, PF, Gratuity, travel allowance; know details here. This merging results in a significant hike in the salary of the employees. According to various sources, the increase in DA will benefit around 3.5 lakh employees. Dearness Allowance must not be confused with the. This means DA is different for employees in the urban sector, semi-urban sector or the rural sector. The Central government at this time is also considering hiking the dearness allowance by four percent in January. After 2006, the formula for calculating dearness allowance has changed and currently DA is calculated as follows, Dearness Allowance % = ((Average of AICPI (Base Year 2001=100) for the past 12 months -115.76)/115.76)*100, Dearness Allowance % = ((Average of AICPI (Base Year 2001=100) for the past 3 months -126.33)/126.33)*100. However, if a salaried employee is provided with an unfurnished accommodation which is rent-free, after the fulfilment of all the pre-requisites, D.A. The memorandum is dated as on April 23th, 2020. As of today, the DA is 50% of the employee’s basic salary after years of a steady increase in the DA percentage. Recently, the government of the India has increased IDA by 5% for this sector. ClearTax serves 2.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India. DA (Dearness Allowance) = 2% to 4% of Basic Salary. stands at 50%?of the basic salary of an employee. Given the current situation, the DA hike for the year 2020 has been put on hold for about 50 lakh Central Government employees. How is HRA and DA calculated in basic salary? Presently, it stands at 50% of the basic salary. This number appears incorrect / invalid. Dearness Allowance Means: In India, Dearness allowance (D.A.) On the basis of the recommendation of the 7th Pay Commission, the cost of this hike will go up to Rs.16,000 crore and will be effective from July 2019. during Income Tax Return (ITR) filing. Display of such IP along with the related product information does not imply BankBazaar's partnership with the owner of the Intellectual Property or issuer/manufacturer of such products. Note that salary here means basic pay, dearness allowance (if included), and commission on turnover based on fixed percentage. The mandate for the seeding of data with Aadhaar which was a pre-requisite for the purpose of releasing funds has also been relaxed by the Cabinet. Uh-oh! HRA is applicable to both employees from the private sector as well as the public sector whereas DA is majorly applicable to employees working in the public sector. Except for this, in all other cases of reemployment, D.A. Basically, Dearness Allowance is understood as a component of salary which is a fixed percentage of an employee’s basic salary, which aims to hedge the impact of inflation. The DA calculation formula was revised and changed after 2006. As a rule, it is practice to merge the DA with the basic salary once the DA percentage breaches the 50% mark. In the meantime, employees from the public sector are ecstatic with anticipation of a merged DA which would mean a major hike in their salaries. This page is best viewed in Chrome, Firefox or IE 11. Enter your number below. Same way, base index also remains fixed for a particular period. The current DA rate stands at 21% as part of pension and salary. The Union Cabinet has recently announced a hike of 5% in the DA for employees and pensioners. The given below is the salary breakup calculator to know the individual amounts of your basic salary. Is Dearness Allowance same as House Rent Allowance ? Dearness Allowance increased by 5% from 12% to 17% from July 2019. This also includes the periodic reviewing and updating the multiplication factor for calculation of DA. Dearness Allowance is calculated as a percentage of an basic salary.The guidelines that govern the DA vary according to where one lives (for example, whether rural or urban). Additionally, there are certain Tax exemptions applicable to HRA which are not available for the DA. Since, this allowance is related to the cost of living, the Dearness Allowance component differs for various employees based on their location. Dearness allowance is calculated based on the inflation of the prices in the market. House Rent Allowance HRA, which is part of the basic salary, is fully or partially exempt from taxes. Several other components are then calculated added in respect to the basic salary and are then added to it to calculate the take-home amount. (12% is the norm). What came as a huge relief to most central government employees was the hike in the Dearness Allowance. The Union Cabinet announced a raise of 2% in the DA of government employees recently. Therefore, 10% of the employee’s salary will be provided under the Odisha Revised Scales of Pay Rules for the financial year 2019-2020. Dearness Allowance Calculations. If total percentage of literate men is 35 of the total population, write a program to find the total number of illiterate men and women if the population of the town is 80,000. The Odisha government also announced that the 10% arrears that are pending due to the recommendations of the 7th Pay Commission will be cleared. Ltd. ClearTax offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. The calculation of DA is based on the percentage of basic salary. No, the private sector employees in India are not entitled to receive Dearness Allowance as a part of their salary. Presently, DA is calculated as per the following formula: % 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, % 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. If you do not get commissions or dearness allowance then the house rent allowance will be 40 percent or 50 percent of your basic salary. D.A. DA is reviewed biannually, once in every 6 months, on the basis of the cost of living index. Once in twice or once in six months, the percentage of Dearness Allowance is increased based on the Consumer Price Index for Industrial Workers Base Year 2001=100. Pensioner’s Dearness Allowance is computed on the basic pension of an employee without commutation. IDA for government sector enterprises is revised quarterly based on the movement of the Consumer Price Index (CPI) in order to compensate for the rising inflation in the country. The Pension Rule 50.A. It is revised every six months according to the Consumer Price Index to help offset the impact of rising levels of inflation. HRA or House Rent Allowance is the salary component given by an employer to an employee in order to meet expenses related to the renting of accommodation which the employee takes for residential purposes. In addition to this, the freezing of DA and DR till July 2021 will help the Centre around Rs.37,500 crore and the state Rs.82,500 crore and this amount will be used in helping the government tackle COVID-19 in the state as a stimulus package. Dearness Allowance- Dearness allowance is a certain percentage of the basic salary paid to employees, aimed at mitigating the impact of inflation. on pension. Dearness allowance is given to central government employees to help them bear their expenses keeping inflation in mind. Tip. Dearness Allowance too, is taken into account for rolling out the next pay commission report. The changed new figure that is received as a result of taking into consideration the increase or decrease in the Consumer Price Index, CPI, is termed as Variable dearness allowance. • The concept of DA was incorporated after After Second World War • Dearness allowance - a cost of living adjustment - is payable to public sector employees, central government employees and pensioners by the government. Display of any trademarks, tradenames, logos and other subject matters of intellectual property belong to their respective intellectual property owners. For calculation, DA is divided into two separate categories: Industrial Dearness Allowance and Variable Dearness Allowance. Which is combined with HRA. (IDA) applies to the Public sector employees of Central Government. It is the responsibility of the pay commissions to take into account every factor that helps with the calculation of the salaries. is not granted to pensioners while they are staying in any place outside India during reemployment. The Central government has also frozen the hike in inflation-linked allowance. Pension revision for the retired employees of the public sector is done whenever a Pay Commission proposes a new salary structure. Industrial dearness allowance or IDA is the allowance applicable to employees of the public sector enterprises. According to various sources, 40% of the arrear amount between January 1st, 2016 and August 31st, 2017 was disbursed during the financial year 2017-2018. Yes, D.A. First is the consumer price index, second, the base index and third is the variable DA amount fixed by the government of India. Only the CPI or Consumer Price Index to help them cope up with the new budget, came lot. 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