7th Pay Commission allowance: Know what is dearness allowance (DA) and how it is calculated

If you are a central government employee or a central public sector employee or a pensioner, knowing about Dearness Allowance (DA) or Dearness Relief (in case of pensioners) and their calculation would be of interest to you

ZeeBiz WebTeam | May 25, 2020, 02:05 PM IST

7th Pay Commission allowance: If you are a central government employee or a central public sector employee or a pensioner, knowing about Dearness Allowance (DA) or Dearness Relief (in case of pensioners) and their calculation would be of interest to you. DA is a cost of living adjustment allowance paid to the government employees, public sector employees and pensioners. This component of your salary break-up is calculated as a percentage of basic salary to mitigate the impact of inflation. This component of your salary is given by the government as a hedge against inflation. PIC Credit: PTI

 

 

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How to calculate Dearness Allowance?

DA or dearness allowance is calculated as a specific percentage of the basic salary which is then added to the basic salary along with other components like HRA (House Rent Allowance) to make up the total salary of an employee of the government sector. Pc Credit: Reuters

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Dearness Allowance Calculation for Central Government employees:

Dearness Allowance % = ((Average of AICPI (Base Year 2001=100) for the past 12 months -115.76)/115.76)*100 where AICPI is All India Consumer Price Index. Pic Credit: Reuters

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Dearness Allowance Calculation for Central Public Sector employees:

Dearness Allowance % = ((Average of AICPI (Base Year 2001=100) for the past 3 months -126.33)/126.33)*100 Pic credit: Reuters

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Dearness relief for pensioners:

Whenever the Central Pay Commission revises the salary structure of the central government employees, it also comes out with a revised pension structure for the retired government employees. Same is the case with Dearness Allowance. Whenever the DA is increased by a certain percentage, the same change gets reflected in the pensions of retired public sector employees, too. This applies to both regular pension as well as family pension. Pic Credit: Reuters

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In order to calculate the HRA, the salary is defined as the sum of the basic salary, dearness allowances and any other commissions. If an employee does not receive a commission or a dearness allowance, then the HRA will be around 40 per cent – 50 pr cent of his/her basic salary.