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As the impact of inflation varies according to the location of the employee, dearness allowance is calculated accordingly. Thus, DA varies from employee to employee based on their presence in the urban, semi-urban or rural sector. As DA is provided to employees to protect against the price rise in a particular financial year, it is calculated twice every year — in January and July.
The formula to calculate the dearness allowance was changed in by the Government. As per the latest updates, DA is fully taxable for salaried employees. If the employee has been provided with an unfurnished rent-free accommodation, it becomes that part of the salary up to which it forms the retirement benefit salary of the employee, provided that all other pre-conditions are met. The Income Tax rules in India require the dearness allowance component to be mentioned separately in the returns that have been filed.
The Industrial Dearness Allowance for public sector employees undergoes quarterly revision depending on the Consumer Price Index to help offset the impact of rising levels of inflation. It is revised every six months according to the Consumer Price Index to help offset the impact of rising levels of inflation. VDA in itself is dependant on three different components as given below.
The pay commission must evaluate and change the salaries of public sector employees based on the various components that make up the final salary of an employee. Therefore, DA is also considered by the Pay Commissions while preparing the subsequent pay commission report.
It is the responsibility of the pay commissions to take into account every factor that helps with the calculation of the salaries. This also includes the periodic reviewing and updating the multiplication factor for calculation of DA. Pensioners, in this case, are those retired employees of the central government who are eligible for either the individual or family pension from the government. Every time the Pay Commission rolls out a new salary structure, the change is also reflected in the pension of the retired employee.
Likewise, if the Dearness Allowance is changed by a particular percentage, the pension of the retired personnel is revised accordingly. As per an estimate, there are more than lakh central government employees who receive the salary from the government. Then there are another lakh retired central government employees who are eligible for a pension.
These changes are going to significantly benefit all the employees and pensioners of the Central Government. Dearness Allowance must not be confused with the HRA as they are two separate components and are treated differently for income tax. One significant difference is that HRA applies to both private and public sector employees, while only public sector employees are entitled to DA. Ever since the revision of the calculation formula, the DA for public sector and central government employees has been consistently rising.
This has happened over a number of years during which the DA percentage rose steadily in order to hedge the rising inflation. This is supposed to be a great salary booster for employees since all other components of the salary are calculated as a percentage of the basic salary.
Demands for merging the DA with the basic salary have been with the government for quite some time. The union cabinet is expected to take a decision on this matter soon. In the meantime, employees from the public sector are ecstatic with anticipation of a merged DA which would mean a major hike in their salaries. It was quite a relief to most central government employees when the hike in the Dearness Allowance was announced.
This move was spearheaded by Indian Prime Minister, Mr. Narendra Modi, and is aimed at benefiting almost 50 lakh Central Government employees and around 55 lakh pensioners. In an effort to reduce the inflation effects on the salaries of these employees, dearness allowance hike is generally offered to pensioners and staffers.
The new budget brought a number of new advancements and developments. As per the proposed changes, this increase in DA in all probability, will work in the favour of more than In India, every subsequent pay commission is expected to re-evaluate the salary of public sector employees, post factoring in the different components of salary. Dearness Allowance is also taken into consideration when the next pay commission report is rolled out.
Pay commissions account for all the factors that are a part of the calculation of salaries of personnel in the public sector. Revision and changing the multiplication factor, too, falls under the purview of the pay commissions. The pension for retired employees of the public sector is revised, each time a new salary structure is proposed by a pay commission.
So is the case with Dearness Allowance. Every instance when DA is increased by a predetermined percentage, the change is reflected in the pensions of retired public sector employees. This is applicable for both regular pension as well as family pension. Dearness allowance is calculated as a specific percentage of the basic salary which is then added to the basic salary along with other components like HRA House Rent Allowance to make up the total salary of an employee of the government sector.
On the other hand, HRA or House Rent Allowance is the salary component given by an employer to an employee in order to meet expenses related to the renting of accommodation which the employee takes for residential purposes. HRA is applicable to both employees from the private sector as well as the public sector whereas DA is majorly applicable to employees working in the public sector.
Yes, Dearness Allowance is different for employees working in urban, semi urban and rural locations. Pension for retired employees of the public sector is revised each time a new salary structure is proposed by a pay commission. Dearness allowance - a cost of living adjustment - is payable to public sector employees, central government employees and pensioners by the government. Professional Tax Professional Tax in Maharashtra.
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What is Variable Dearness Allowance? Variable Dearness Allowance majorly has three components: The consumer price index The base index The variable DA amount fixed by the Government of India The third component is always fixed until the government revises minimum wages for employees. What is Dearness Allowance Merger? FAQs for Dearness Allowance.
What is Dearness Allowance? What is variable dearness allowance? Does Dearness Allowance vary based on location of employment?