There have been a lot of rumors that the Center will announce another Dearness Allowance (DA) raise in July, but nothing has been confirmed as of yet. According to experts' predictions based on the data from the previous four months, DA may rise by 4%. But, according to recent allegations that surfaced days after Union Minister Anurag Thakur announced a 4% increase in dearness allowance for more than 50 lakh Central government employees, the government may adopt a new formula for the anticipated DA boost.
42% Dearness Allowance Hike
Government workers and pensioners who receive Dearness Allowance as part of their pay are being compensated for the rise in living expenses brought on by inflation. Twice a year, in January and July, the allowance is updated. Yet not every government worker in India receives the same DA. Based on factors including seniority, department, and job location, among others, it might vary greatly. For those who get a salary, DA is entirely taxed.
The DA is now 42% after the increase in compliance with the 7th Central Pay Commission's recommendations. The employees will begin receiving the benefit of enhanced DA as of this month, April.
New Formula for Dearness Allowance
The dearness allowance calculation formula was updated by the Labor Ministry. In 2016, the government revised the Dearness Allowance base year and unveiled a new series of Wage Rate Index data (WRI-Wage Rate Index). According to the Labor Ministry, the former series of WRI with the base year 1963–65 was replaced by the new series with the base year 2016=100.
The dearness allowance is computed by multiplying the basic salary by the 7th Pay Commission's current rate of dearness allowance. If your basic pay is Rs. 56,900 DA (56,900 x 12)/100, the current percentage rate is 12%. The dearness allowance % is 115.76 multiplied by the 12-month CPI average. Whatever is now received will be divided by 115.76. The result will then be multiplied by 100.
Would The Dearness Allowance Be Subject To Tax?
Dearness Compensation is entirely taxed. According to Indian income tax regulations, dearness allowance must be shown separately in income tax returns (ITR).
