7th Pay Commission: Important Updates for Central Government Employees Before New Year!

For employees of the central government, there has been an important update prior to the expected next round of Dearness Allowance (DA) hikes in 2023. A new formula will replace the one currently used to calculate DA. The Ministry of Labor and Employment revised the formula.

DA Calculation According to the New Formula:

The base year for the DA hike has been changed by the Centre. With 2016 as the base year, a new WRI-Wage Rate Index series has been released. According to the guidelines of the 7th Pay Commission, the previous series with the basis years 1963–65 will be replaced with a new series with the base year 2016–100.

Based on the current rate of DA employment and base pay, the DA increase for government employees is confirmed. The calculation is DA (18000x12)/100 for a basic salary of Rs. 18,000 at the current rate of 12 percent. Then multiplied by 100 after being divided by 115.76. DA percent is 115.76, which is the average CPI over the previous 12 months.

How Much Will DA Hike Affect Your Salary?

If an employee's basic pay is Rs. 26,000, then the 38 percent calculation would result in DA being worth Rs. 9,880. If the expected 4 percent salary increase is approved, bringing the total to 42 percent, the increase in pay plus the subsequent DA boost will be close to Rs 910 for this basic wage.

The expected announcement might be made next March, around the Holi holiday. The 7th Pay Commission's regulations make DA completely taxable, therefore central government employees will also be responsible for paying tax on pay increases.