Dearness Allowance (DA)

What is Dearness Allowance (DA)?

Dearness Allowance (DA) is an amount paid by the Govt. to employees as an impact of inflation. It is a component of salary which is a fixed percentage of basic salary. It is provided to retired as well as current employees. It is directly associated with the cost of living so that differs for employees with different locations. DA is different for employees in the agricultural sector, urban sector, or semi-urban sector. DA may be a fully taxable allowance and is applicable to India as well as Bangladesh. 

Despite several measures by the Indian Govt. to control the rate of inflation, only partial success has been achieved because the costs move according to the market. 

Types of Dearness Allowance:

• (VDA) Variable Dearness Allowance – Applies to Central Government Employees
• (IDA) Industrial Dearness Allowance – Applies to Public Sector employees

 Dearness Allowance Calculation:

DA is calculated twice per financial year – January and July. DA is calculated using the formula:

For Central Public Sector Employees:

% of DA = {(Average of the All-India Consumer Price Index (Base year -2001 =100) for the last 3 months -126.33)/126.33} x 100

For Central Government Employees:

% of DA = {(Average of the All-India Consumer Price Index (Base year -2001 =100) for the last 12 months -115.76)/115.76} x 100

Also, See: Conveyance Allowance