What is Dearness Allowance (DA)?
Dearness Allowance (DA) is a cost-of-living adjustment allowance paid to government employees, public sector employees, and pensioners in India. It is revised twice a year (in January and July) based on the Consumer Price Index (CPI).
Why is DA Important?
- Inflation Adjustment: DA helps employees maintain their purchasing power as prices rise.
- Salary Component: DA forms a significant portion of the total salary for government employees.
- Pension Impact: For retirees, DA is added to their pension, ensuring their income keeps up with inflation.
How is DA Calculated?
The calculation of DA is based on the Consumer Price Index (CPI). The formula is:
DA = ((Average CPI for Last 12 Months - Base CPI) / Base CPI) × 100
Example Calculation
- Current DA: 42%
- Current CPI: 392
- Projected CPI: 410
Using the formula:
DA Increase = ((410 - 392) / 392) × 100 = 4.59%
Projected DA = 42% + 4.59% = 46.59%
Historical DA Rates
| Year | DA Rate (%) |
|---|---|
| 2016 | 0% |
| 2017 | 5% |
| 2018 | 7% |
| 2019 | 12% |
| 2020 | 17% |
| 2021 | 28% |
| 2022 | 34% |
| 2023 | 42% |
FAQs About DA
1. What is the current DA rate?
As of October 2023, the current DA rate is 42%.
2. How often is DA revised?
DA is revised twice a year, in January and July.
3. Is DA taxable?
Yes, DA is fully taxable under the Income Tax Act.
4. How is DA calculated for pensioners?
DA for pensioners is calculated using the same formula as for employees.