7th Pay Commission: Central govt employees expected to get 5% DA hike; all about Dearness Allowance
7th Pay Commission: Days after Union Budget presented by Finance Minister Nirmala Sitharaman in Parliament, Central government employees are likely to get good news by the end of July. Though, in Budget 2019, Central government employees did not find any recommendation of the fulfilment of their demands of increment in minimum pay and fitment factor beyond the 7th Pay Commission recommendations. However, central government employees are expected to get an increment in Dearness Allowance (DA) of up to 5 per cent by July end.
According to reports, an increase in DA for Government employees announcement is expected in August. It is because the AICPI data until June has not yet come. Once data is released, the figures on DA increment will be released by the end of July. Notably, it will be the biggest increase in the DA since the implementation of the 7th pay scale in 2016.
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- What is Dearness Allowance (DA)
Dearness Allowance (DA) is basically a component of salary paid to government employees. DA is a cost of living adjustment allowance paid to government employees and pensioners linked to the Consumer Price Index to offset the impact of inflation. DA is fully taxable.
In January 2019, the Central Government had increased the DA by three per cent.
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DA is decided on the basis of the city. It varies depending on the employee's office location. DA will be more for the employees in the urban area. While for semi-urban areas and villages DA will be less.
- DA Vs HRA
Just like DA, House Rent Allowance (HRA) is also an important component of the employee's salary given by employer to help fulfill the housing needs of its employees.
However, HRA is provided to both - public sector and private sectors employees. Calculation of DA is based on the specific percentage of Basic Salary, which is then added to HRA in Basic.
- DA and AICPI
DA is linked to the All India Consumer Price Index (AICPI). For DA calculation, AICPI average is taken in the formula.
- How is DA calculated:
Percentage of DA = {(Average of All-India Consumer Price Index for the past 12 months (Base year 2001=100) -115.76)/115.76}x 100.
Seventh Pay Commission is an administrative system that is set up by the Government of India to determine the salaries of government employees. It benefits per 1 crore central government employees, including around 53 lakh pensioners.
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