7th Pay Commission: 4% increase in the dearness allowance on basic pay!

on Thursday, March 7, The Union Cabinet has announced the hike of the dearness allowance (DA) to 50% of basic pay from the current rate of 46% . This will be effective from January 1 this year. Dearness Allowance or DA is an allowance that is given to the employees by the government to compensate for the rising cost of living due to the inflation.

This 4% hike took the DA to 50% from the previous 46%!

The announcement came just before of the Lok Sabha elections 2024. This will benefit 48.67 lakh central government employees and 67.95 lakh pensioners. “The Union Cabinet has approved to release of an additional installment of Dearness Allowance (DA) to Central Government employees and Dearness Relief (DR) to pensioners from January 1, 2024, representing an increase of 4 percentage points over the existing rate of 46% of the basic pay/pension, to compensate against price rise,” Union Minister Piyush Goyal said after the Cabinet meeting.

As it is revised every six months, the Dearness Allowance or the DA is a cost-of-living adjustment allowance that is provided by the government to public sector employees and pensioners. The adjustment in DA is applicable to both employees and pensioners and it is determined based on the latest Consumer Price Index for Industrial Workers (CPI-IW), which gets released monthly by the Labour Bureau. It is calculated based on a percentage of the basic salary. For Central Government employees: Dearness Allowance percent = ((Average of AICPI (Base Year 2001=100) for the past 12 months -115.76)/115.76) *100

With the increase in DA, the transport allowance, the canteen allowance, and the deputation allowance among others have also been increased by 25 per cent. House Rent Allowance has also been raised from 27 per cent, 19 per cent and 9 per cent of basic pay to 30 per cent, 20 per cent and 10 per cent, respectively. The increase of DA and DR is based on the recommendations of the 7th Central Pay Commission.