DA hike: The Centre is anticipated to make an announcement regarding the second hike in Dearness Allowance (DA) and Dearness Relief (DR) for employees and pensioners from July 2024 in September. It is estimated that the government led by Prime Minister Narendra Modi might sanction a 3% increase in DA and DR during this phase. DA or Dearness Allowance is assigned to serving government staff, whereas DR or Dearness Relief is allocated to pensioners.
With the anticipated 3% increase scheduled for September, the total dearness allowance (DA) is set to rise to 53%. Despite this, it is improbable that the government will disburse the 18-month arrears for DA and dearness relief (DR) that were paused amid the COVID-19 pandemic.
How much tax do I have to pay? Calculate now
The last DA hike was announced on March 7, 2024, and it was effective from January 1, 2024. AT that time, the DA was raised to 50%. This increase in DA led to a rise in various allowances, including the House Rent Allowance (HRA), over the past few months. The government typically announces DA/DR increments biannually, with the updates shared in March and September. However, these increases are applied retroactively from January and July each year.
The calculation of the DA hike is determined based on the All India Consumer Price Index (AICPI), which monitors changes in retail prices across different sectors. Initially, the DA increment was calculated using the consumer price index with the base year 2001. However, starting from September 2020, the government transitioned to a new consumer price index with the base year 2016 for computing the DA.
DA calculation
The DA calculation formula with the new base year is as follows:
For Central Government Employees
DA% = [(Average of AICPI (Base Year 2001 = 100) for the last 12 months – 115.76)/115.76] x 100
For Public Sector Employees
DA% = [(Average of AICPI (Base Year 2001 = 100) for the last 3 months – 126.33)/126.33] x 100
From December 2023 to June 2024, the CPI-IW has risen by 2.6 points, increasing from 138.8 to 141.4. Consequently, the percentage of DA hike is expected to rise from 50.28% to 53.36% from July 2024.
Last year, the July 1 DA hike was officially announced on October 18, 2023, ahead of the festive season. Traditionally, the Centre has a practice of disclosing the July DA increment before the onset of the festive season. With past patterns indicating prompt notifications regarding DA adjustments by the government, an imminent announcement regarding the upcoming revision is anticipated.
DA hike effect
In the past, the EPFO stated that with a hike in DA and DR, the allowances that will see an increase will include Touch Location Allowance, Conveyance Allowance, Special Allowance for children of women with disabilities, Children education allowance, House Rent Allowance or HRA, Hotel Accommodation, Reimbursement of Traveling charges for travel within the city (touring station), Reimbursement of Food Charges/ Lump sum amount or Daily Allowance, or journeys performed by own Car/taxi, Auto rickshaw, own Scooter etc. at the place where no specific rate has been prescribed by Director of Transport of concerned State or the neighbouring State, Rate of transportation of Personal effects by road on transfer etc., Dress Allowance, Split Duty Allowance, and Deputation (Duty) Allowance, will significantly increase the total compensation of the central government employees.
7th Pay Commission
As per the guidelines outlined in the 7th Pay Commission (7th CPC) rules, endorsed by the central government, a significant provision dictates that once the Dearness Allowance (DA) accumulates to 50 percent of the fundamental salary, the allowance rates are slated to escalate to 24 percent. This particular regulation is intricately crafted to uphold equitable remuneration practices, essentially underscoring our steadfast dedication towards fostering your welfare and safeguard in the face of adversities. The NDA government hasn’t commented on the revision of DA rates so far.
The 7th Pay Commission, which was formed in February 2014, had its recommendations put into effect on January 1, 2016. Typically, the Central Government establishes a pay commission every decade to adjust the salaries of government staff.
As of now, there are no indications from the government regarding the formation of the 8th Pay Commission.