Dearness allowance

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The Dearness Allowance (DA) is a cost of living adjustment allowance paid to Government employees, Public sector employees (PSU)and pensioners in Pakistan, Bangladesh and 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 DA vary according to where one lives. DA is a fully taxable allowance.. Two types : 1) DA given under terms of employment 2) DA not given under the terms of employment

History[edit]

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, however later it was linked to Consumer Price Index. In the past various committees have been constituted to look into the issue of payment of D.A. to Central Government employees.
The III 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 neutralisation granted with effect from 1-1-1973 ranged from 100% to 35%.
The IV 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 instalment 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 neutralisation now ranged from 100% to 65%.
The V Central Pay Commission looked into the issue of differential neutralisation 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 VI 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) [4]

DA Calculation Sheet[edit]

Formula for calculating Dearness Allowance for Central government employees after 1.1.2006 is :

Dearness Allowance %= {(Average of AICPI(Base year 2001=100) for the past 12 months – 115.76)/115.76}*100

Formula for calculating Dearness Allowance for Central public sector employees after 1.1.2007 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 1.1.2006 with Base year 2001=100[5]

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[6] 244 246 252 253 253 253 253 253 246.91
2015 254 253 254 256 258[7] 261 263[8] 264[9] 266 269 270 269 269
2016 269 267 268 271 275[10] 277[11] 280[12] 278[13] 277 278 277 275[14] 274.33
2017 274 274[15] 275 277

The DA Rate for Industrial Workers (since 1.1.2007 with Base year 2001=100) for 3rd Quarter (Sep-Dec), 2015 has been declared as 107.9% and that of 4th Quarter (Jan-Mar), 2016 is 112.40%.

The Vth Pay Commission recommendations were implemented since 1.1.1996 and consequently DA rate wef 1.1.996 became 0. Further in 1994 Central Government merged 50% of the Dearness Allowance (DA) with the basic pay w.e.f. 01.04.2004 and the Dearness Allowance continued to be calculated with reference to the 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 01.07.2004 till 01.07.2007.[16]

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 VIth Pay Commission recommendations wef from 1.1.2006 is shown in table below :-

Year 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017
Month Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan
DA % 0 2 6 9 12 16 22 27 35 45 51 58 65 72 80 90 100 107 113 119[17] 125 132 136 [18]

DA rate as applicable after implementation of VIIth Pay Commission recommendations wef from 1.1.2016 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

Print Media Workers

For print media workers the Government of India has notified a DA Formula in the Gazette No 2532(E) of Nov 11, 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 Feb 7, 2014. The Hon. Supreme Court upheld the recommendations as 'revised and determined' by Hon 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 July 1, 2009 to June 30, 2010.

The average for the current DA period January to December 2017 is 274, which is the 12-month average AICPI-IW of Jan 1, 2016 to December 31, 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.

Pensioners[edit]

Both pensioners and their families are granted DA and this continues following reemployment with the Central or State Government, a Government undertaking, an autonomous body 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; however, the DA remains accessible to overseas pensioners whilst the recipient is not employed.

From 1 October 1984 to date, pensioners are paid DA at a certain percentage of basic pension. The allowance is calculated on the original pension without commutation. From 1 July 1986 the percentage has been revised every 6 months based on the cost of living index .72 to 80 DA may be allowance.

References[edit]

http://labourbureau.nic.in/OWSTP%20Chap.%20III.htm DA Calculator for PSU employees DA Calculator for CG employees

External links[edit]