The Union government is likely to restore the 7th pay commission Dearness Allowance (DA) and Dearness Relief (DR) benefits for the central government employees in September, according to media reports. It has been decided in the meeting of the finance ministry officials, the National Council of Joint Consultative Machinery and the department of personnel and training on June 26, Mint reported.
Earlier, there have been reports that DA will be resumed from this month. However, finance ministry later clarified that it had not issued any notice regarding the resumption of DA for central government employees and pensioners from July. “A document is doing rounds on social media claiming resumption of DA to Central Government employees and Dearness Relief to Central Government pensioners from July 2021. This OM is fake and no such OM has been issued by GOI," ministry of finance wrote
Let’s take look at DA rate, calculation and arrears
Dearness Allowance (DA) is a component of salary of government employees and pensioners, aimed at soothing the impact of inflation. To cope up with the increasing inflation rates, the effective salary of government employees is revised periodically. As DA is related to cost of living, it varies from employee to employee based on whether they work in urban sector, semi-urban sector or the rural sector.
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DA has been included to compensate for price rise or inflation in a particular financial year since 1996. It is revised twice every year – in January and July. In 2006, the Union government changed the formula to calculate the dearness allowance for central government employees and pensioners. The DA is calculated as per the following formula, as mentioned by ClearTax.
How DA is Calculated
For the central government employees: Dearness Allowance % = ((Average of All-India Consumer Price Index (Base Year 2001=100) for the past 12 months -115.76)/115.76)*100
For Central public sector employees: Dearness Allowance % = ((Average of All-India Consumer Price Index (Base Year 2001=100) for the past 3 months -126.33)/126.33)*100
Dearness Allowance is divided into two categories — industrial dearness allowance (IDA) and variable dearness allowance (VDA). The industrial dearness allowance depends on the Consumer Price Index (CPI) and is revised quarterly. It is applicable for the public sector employees of the Central government. The variable dearness is applicable for central government employees. It is revised in every six months depending on base index and consumer price index. variable DA amount remains fixed unless the government revises the basic minimum wages.
At present, the central government pays its employees a dearness allowance of 17 per cent, which has been effective from July 2019. In April last year, the central government put hike in dearness allowance on hold in the wake of coronavirus outbreak. The ministry also stated that no arrears will be paid from January 1, 2020, to June 30, 2021. However, any hike in DA due to revision on July 1, 2021, will take into account the previous hikes as well, the central government said. The dearness allowance of the central government employees was raised by 4 per cent in January 2020, by 3 per cent in June 2020 and by 4 per cent in January this year, according to the Hindustan Times. DA is fully taxable for salaried employees.