DA Update: Centre Likely to Hike DA by 5% in July; How Much Will Your Salary Increase?

DA Hike 7th Pay Commission: At a time when the inflation rate in India has constantly remained above the Reserve Bank of India’s comfort zone of 2-6 per cent, the central government is likely to give a relief to its employees and pensioners. CPI inflation has already touched its eight-year high, and prices of various commodities are increasing. To offset the repercussions of inflation, the government is likely to announce another DA hike for central government employees under the 7th pay commission.

According to a report by Zee News, the government may consider a DA hike of as much as 5 per cent in July. This means central government employees will get a DA of 39 per cent if the report is to be believed. Currently, government employees get a DA of 34 per cent on their basic salary. If the DA hike of 5 per cent is implemented, they are going to get a 39 per cent dearness allowance on top of their basic pay.Dearness allowance (DA) is given to government employees, while dearness relief (DR) is for pensioners.

The DA is revised based on the changes in the All India Consumer Price Index (AICPI). Now, as the AICPI is prevailing high, the chances of government employees getting a raise in dearness allowance is also high. The retail inflation in May stood at 7.04 per cent, which is above the RBI’s target level of 2-6 per cent.

The April AICPI has fuelled rumours that the government may consider a DA hike of 5 per cent in July.

The central government had held back three installments of DA and DR for January 1, 2020, July 1, 2020, and January 1, 2021, in view of the unprecedented situation which arose due to the Covid-19 pandemic. Finance Minister Nirmala Sitharaman has said the holding back of DA and DR saved about Rs 34,402 crore, in a written reply to a question in the Rajya Sabha in August last year.

DA Hike: Calculation Formula

Dearness Allowance Percentage = ((Average of All-India Consumer Price Index (Base Year 2001=100) for the past 12 months -115.76)/115.76)x100.

For Central public sector employees: Dearness Allowance Percentage = ((Average of All-India Consumer Price Index (Base Year 2001=100) for the past 3 months -126.33)/126.33)x100.

How Much DA is Going to Increase?

Going by the department of expenditure’s notice, if an employee’s basic pay is Rs 18,000, he or she will get a Dearness Allowance of Rs 6,120 after the latest hike that was implemented in April. At the rate of 31 per cent DA earlier, the employee was getting DA of Rs 5,580. This will mean that an increase of Rs 540 has been made after the latest DA hike. If the DA is increased by another 5 per cent, that is, if the employee gets 39 per cent DA on a basic salary of Rs 18,000, the DA will be Rs 7,020. This means that the salary will increase by Rs 900 if the DA hike of 5 per cent is implemented.

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