The government has recently hiked the rates of Dearness Allowance (DA) which is good news for Central & State Govt employees. This hike will greatly affect their remunerations, establishing a hike in their earnings. It will not only be advantageous for the employees currently working under the company, but it will also have a positive impact on pensioners’ income.
What do you understand by the term Dearness Allowance (DA)?
Dearness Allowance abbreviated as DA is another important factor in the remuneration structure of the Government employees and pensioners. It is usually given with an aim of addressing inflationary factors because it keeps employees’ purchasing power intact in issues to do with increase in the general cost of bring goods and services.
DA is arrived at from the basic wage and is normally represented in figure percentages. For instance, an employee earns ₹30,000 which is his or her basic salary and if the DA rate is at 50%, the employee will receive ₹15,000 for DA.
How is DA Calculated?
The computation of DA is based on the All India Consumer Price Index for Employees (AICPI). It is notable that any alteration made to the AICPI results in adjustment of the DA rates either higher or lower. The following formula is typically used to determine DA:
DA% = [(Current AICPI – Base AICPI) / Base AICPI] x 100
Recent DA Increase
In the recent policy circular issued, the government has increased DA from 50% to 54% and that is from a percentage perspective, it is 4%. Earlier when DA was at 50% on the basic pay of ₹18000, the DA was ₹9000. Comprising of the recent addition to 54%, the new DA emerges to ₹ 9,720 rendering an overall hike of ₹720.
Likewise, those who were getting ₹25,000 as basic salary got an enhanced DA from ₹12,500 to ₹13,500 which means an increment of ₹ 1000. The employees with ₹ 35,000 salary received a hike from ₹17500 to ₹18900 with an overall gain of ₹ 1400.
With the basic pay set at ₹50000, DA increased to ₹27,000 from ₹25,000, thus a raise of ₹2,000. Present DA of ₹40,500 is for those who get ₹75,000 pay and this has been increased by ₹3,000 from ₹37,500. Lastly, the employees whose basic pay was ₹ 1,00,000 DA saw this figure raised from ₹ 50,000 to ₹ 54,000 giving them an extra of ₹ 4,000.
Impact of the DA Hike
- This increase in DA will have several positive outcomes for government employees and pensioners:
- Salary Boost: They will realize a improvement in their overall wages, therefore meaning that the new DA percentage rate would be far much higher.
- Pension Increase: Another focal area that will benefit with the DA hike is pensioners, who will see their financial status enhanced.
- Higher Allowances: These will go up because certain allowances include DA such as House Rent Allowance (HRA).
- Improved Savings: As income increases, the amount of money an employee is able to save should also increase.
- Economic Impact: Higher spending because of more disposable income can impact the economy positively.
DA Rates Across States
Other than the central government there are many state governments which also revise their DA rates. Here’s a quick look at the current DA percentages in some major states:
- Uttar Pradesh: 42%
- Madhya Pradesh: 46%
- Rajasthan: 48%
- Gujarat: 45%
- Maharashtra: 46%
Why DA Hike Should Be Utilised To The Fullest
To take full advantage of the DA increase, employees should consider the following:
- Create a Budget: Try to revise the budget considering the increased income.
- Increase Savings: For instance, redirect at least an additional amount towards saving to the existing spending towards savings.
- Repay Debts: Pay off any and all debts that remain outstanding using the additional funds.
- Invest Wisely: Find out about long term investment instruments to make you have more wealth.
- Review Insurance: Evaluate your insurance protection plan and possibly enhance it if needed.