Dearness allowance

Dearness Allowance (DA) is a cost-of-living adjustment, an increase made to the basic pay of government officials and public sector workers’ employees. Public sector unit employees are also government employees, but not civil servants. Some private sector employees and civil servant, are pensioners in India.

Dearness Allowance is calculated as a percentage of an Indian citizen's basic salary to mitigate the impact of inflation on people. Indian citizens may receive a basic salary or pension that is then supplemented by a housing or a dearness allowance, or both. The guidelines that govern the Dearness Allowance vary according to where one lives. Dearness Allowance is a fully taxable allowance.

The two types of Dearness Allowance are:

  • Dearness Allowance given under terms of employment.
  • Dearness Allowance not given under the terms of employment.

History

The Dearness Allowance was introduced following the second World War, and was then known as the "Dear Food Allowance". The "Old Textile Allowance" was also introduced in 1947, though this was revised and reintroduced in 1953 as the "Revised Textile Allowance".[1] Initially DA was given in response to demand of employees for wage revision. Later it was linked to Consumer Price Index. In the past various committees have been constituted to look into the issue of payment of DA to Central Government employees.
The 3rd Central Pay Commission recommended payment of DA whenever the CPI rose by 8 points over the index of 200 (with base 1960 = 100). The extent of neutralization granted with effect from 1 January 1973 ranged from 100% to 35%.
The 4th Central Pay Commission recommended the grant of DA on a 'percentage system' of the basic pay (1986). It also recommended payment of DA twice a year; 1 January and 1 July. Each installment of DA was to be calculated with reference to the percentage increase in the 12 monthly average of All India Consumer Price Index (base 1960). The extent of neutralization now ranged from 100% to 65%.
The 5th Central Pay Commission looked into the issue of differential neutralization and found it to be injustice to senior officers and recommended uniform neutralization of 100% to employees at all levels.[2] The Commission had suggested that dearness allowance should be converted into dearness pay every time the cost of living rises by 50% over the base level.[3]
The 6th Central Pay Commission recommended revision of base year of the Consumer Price Index (CPI) as frequently as feasible.It also changed base year for DA calculation to 2001 (base year 2001=100) [3]

Calculation sheet

Formula for calculating Dearness Allowance for Central government employees from 1 January 2006 is :

Dearness Allowance %= {(Average of AICPI(Base year 2001=100) for the past 12 months – 115.77)/115.77}*100

In October 2021, the government revised the Consumer Price Index for Industrial Workers (CPI-IW) base year from 2001 to 2016.[4] A linking factor of 2.88 was defined for converting the new series with the base 2016=100 to the previous series on base 2001=100. Based on this, the DA is currently calculated with the following formula

DA  = (A  – 261.4)*100/(261.4) Where A = Avg of CPI-IW (base 2016=100) for the past 12 months x linking factor of 2.88[5]

Formula for calculating Dearness Allowance for Central public sector employees from 1 January 2007 is :

Dearness Allowance %= {(Average of AICPI(Base year 2001=100) for the past 3 months - 126.33)/126.33}*100

Dearness allowance with effect from January or July of a particular year in the future, once the AICPI(IW) for a particular month is published by the Government, whereas for PSU employees it is declared quarterly by DPE (Department of Public Enterprise).

Beginning 1 January 1996, the Dearness Allowance is granted to compensate for price increases to which the revised pay scales relate. This will be reviewed twice a year, on 1 January and 1 July.

The following table shows All India Consumer Price Index since 1 January 2006 with Base year 2001=100[6]

Year Jan Feb March April May June July Aug Sept Oct Nov Dec Average
2006 119 119 119 120 121 123 124 124 125 127 127 127 123
2007 127 128 127 128 129 130 132 133 133 134 134 134 131
2008 134 135 137 138 139 140 143 145 146 148 148 147 141.66
2009 148 148 148 150 151 153 160 162 163 165 168 169 157
2010 172 170 170 170 172 174 178 178 179 181 182 185 175.9
2011 188 185 185 186 187 189 193 194 197 198 199 197 191.5
2012 198 199 201 205 206 208 212 214 215 217 218 219 209.33
2013 221 223 224 226 228 231 235 237 238 241 243 239 232.16
2014 237 238 239 242[7] 244 246 252 253 253 253 253 253 246.91
2015 254 253 254 256 258[8] 261 263[9] 264[10] 266 269 270 269 261.42
2016 269 267 268 271 275[11] 277[12] 280[13] 278[14] 277 278 277 275[15] 274.33
2017 274 274[16] 275 277 278 280[17] 285[18] 285[19][20] 285[21] 287[22][23] 288 286 281.167
2018 288 287 287[24] 288 289 291[25] 301 301 301 302 302 301[26] 294.33
2019 307[27] 314[28] 320[29] 322 Archived 2022-06-03 at the Wayback Machine 325 328

The DA Rate for Industrial Workers (since 1 January 2007 with Base year 2001=100) for 3rd Quarter (Oct-Dec), 2015 has been declared as 107.9% and that of 4th Quarter (Jan-Mar), 2016 is 112.40%.

The 5th Pay Commission recommendations were implemented since 1 January 1996 and consequently DA rate with effective from 1 January 1996 became 0. Further in 1994 Central Government merged 50% of the Dearness Allowance (DA) with the basic pay with effective from 1 April 2004 and the Dearness Allowance continued to be calculated with reference to the All IndiaConsumer Price Index for Industrial Workers (AICPI-IW) average as on 1 January 1996 of 306.33 without changing the index base consequent to the merger. Accordingly, Dearness Allowance (DA) as mentioned in table below were sanctioned from 1 July 2004 till 1 July 2007.[30]

Year 1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007
Month Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan July
DA % 0 4 8 13 16 22 32 37 38 41 43 45 49 52 55 59 61 64 67 71 74 79 85 91
DA% after 50% merger in 1.3.2004 - - - - - - - - - - - - - - - - - 14 17 21 24 29 35 41

DA rate as applicable after implementation of 6th Pay Commission recommendations with effective from 1 January 2006 is shown in table below :-

Year 2006 2006 '07 '07 '08 '08 '09 '09 2010 2010 '11 '11 '12 '12 '13 '13 '14 '14 '15 '15 '16 '16 '17 '17 '18 '18 '19 '19
Month Jan July Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul
DA % 0 2 6 9 12 16 22 27 35 45 51 58 65 72 80 90 100 107 113 119[8] 125 132 136[31] 139 142[32] 148 154 164[33]

DA rate as applicable after implementation of 7th Pay Commission recommendations with effective from 1 January 2016 is shown in table below :-

Year 2016 2016 2017 2017 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025 2026
Month Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan
DA % 0 2 4 5[34] 7[35] 9[36] 12[37] 17[33][38] 17 17 17 31[39] 34[40] 38[41] 42[42] 46[43] [44] 50[45] 53

Print media workers

For print media workers the Government of India has notified a DA Formula in the Gazette No 2532(E) of 11 November 2011, as recommended by the Majithia Wage Board for Journalists and Non-Journalists. The said Gazette notified formula was subsequently upheld by the Supreme Court of India by its judgment made on 7 February 2014. The Supreme Court of India upheld the recommendations as 'revised and determined' by Justice (retd) Majithia. While 115.76 is the Base and Divisor for Central Government staff, for employees coming under Majithia Wage Board 167 had been recommended as Base and Divisor. The said 167 is the 12-month average of 1 July 2009 to 30 June 2010.

The average for the current DA period January to December 2017 is 274, which is the 12-month average AICPI-IW of 1 January 2016 to 31 December 2016. The DA calculation for Jan 2017 to June 2017 is 274 minus 167 * Basic Pay and the result divided by 167. Total points 107.

7th Pay Commission

Dearness allowance rate applicable after implementation of 7th Pay Commission recommendations with effective from 1 January 2016 as shown in above table. Accordingly the Nodal Authority Department of Expenditure, Ministry of Finance has issued the Office Memorandum as shown below:-

Year 2016 2016 2017 2017 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025
Month Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan July
DA % 0 2[46] 4[47] 5[48] 7[49] 9[50] 12[51] 17[52] 17[53] 17 17 28[54]

31[55]

34[56] 38[41] 42[42] 46[41] 50[57] 53[58]

Pensioners

Both pensioners and their families are granted DA and this continues following reemployment with the Government of India or State Governments, a public sector undertaking, autonomous bodies or a local body; that is, DA is allowed in addition to a recipient's fixed pay or "time scale". In other cases of reemployment, access to DA is subject to the limit of emoluments last drawn.

DA is not allowed during a pensioner's time overseas if employment is undertaken. It remains accessible to overseas pensioners whilst the recipient is not employed.

Since 1 October 1984, pensioners are paid DA at a certain percentage of basic pension. This is calculated on the original pension without commutation. Since 1 July 1986 the percentage has been revised every six months based on the cost of living index.

References

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DA Calculator for PSU employees DA Calculator for CG employees

Time Interval for revision of dearness allowance

Confirm! DA/DR from July, 2019: 5% increase in 7th CPC DA @17% and 10% increase in 6th CPC DA @ 164%