The federal government has finally raised the dearness allowance (DA) for its employees by 4%. This rise will take effect on July 1, 2023, raising the DA to 46%. Let's examine the specifics.

Understanding Dearness Allowance and Dearness Relief:
Employees receive a dearness allowance, which is an extra sum, to offset the effects of inflation and preserve their purchasing power. However, dearness alleviation helps retirees by increasing their monthly pension.

Calculating DA hike under the 7th Pay Commission:
In 2006, the federal government updated the algorithm used to determine DA and DR. As of june 2022, the methodology takes into account the percentage rise in the All india Consumer Price Index (AICPI) 12-month average.

The formula for central government employees:
DA (%) = ((Average of AICPI for the past 12 months - 115.76)/115.76) * 100

Formula for public sector (Central Government) Employees:
DA (%) = ((Average of AICPI for the past 3 months - 126.33)/126.33) * 100

Impact and beneficiaries: Approximately 48.67 lakh central government employees and 67.95 lakh pensioners will benefit from this 4% DA hike. The combined impact on the exchequer is estimated to be Rs 12,857 crore annually.

Salary hike example:
For instance, if someone with a monthly salary of Rs 50,000 has a basic pay of Rs 15,000, their current DA is Rs 6,300 (42% of the basic pay). After the 4% hike, their new DA will be Rs 6,900, resulting in a monthly increase of Rs 600.

Previous DA hike and state government actions:
In march 2023, the government raised DA and DR by 4% to reach 42%. Various state governments, including Madhya Pradesh, Odisha, Karnataka, Jharkhand, and Himachal Pradesh, also increased DA for their employees.

DA taxability:
As part of the salary, DA is taxable based on the individual's slab rate.
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SIBY JEYYA

20/10/2023 02:16 PM