DA hiked to 50%: Will it lead to higher basic salary for central government employees? Key questions answered

The dearness allowance (DA) for central government employees has recently been increased by 4 per cent to 50 per cent. At the same time, the Union Cabinet also cleared additional dearness relief (DR) of 4 per cent from 46 per cent earlier. 

The increased DA and DR came into effect from January 1, 2024. This hike in DA and DR is offered as compensation against the price rise.

The government's decision has sparked doubts and confusion among many central government employees. One such confusion in the minds of employees and pensioners is whether dearness allowance and dearness relief would be merged with basic pay. 

For the unversed, the increased dearness allowance is set to benefit nearly 49.18 lakh central government employees and 67.95 lakh pensioners. 

ALSO READ: Cabinet approves 4% hike in Dearness Allowance for government employees

Let us answer some key questions related to DA/DR:

Will dearness allowance be merged with basic salary?

From the available reports, this is an unlikely scenario. The 7th Pay Commission did not recommend any such measure, ET reported, quoting Sanjeev Kumar, partner of Luthra and Luthra Law Offices, India.

What happened in a similar instance in the past?

The speculation of merging DA with basic pay arose because in a similar instance in the past, when basic pay touched the 50-per-cent mark, DA was merged with the basic pay. In fact, the recommendation of the 5th Pay Commission report was to merge DA with basic pay. After this recommendation, DA amounting to 50 per cent of the basic pay was merged in 2004.

However, the later commissions including the 6th Pay Commission opted against such a merger. 

What will happen to other allowances linked to the dearness allowance?

As DA touches 50 per cent, all other related allowances such as house rent allowance, daily allowance, gratuity ceiling and hostel subsidy will increase.

This happens since these allowances are linked to the DA and as the DA rises, they rise too.

The allowances that would witness an increase in alignment with DA include HRA, children's education allowance, hostel subsidy, dress allowance, daily allowance and special allowance for childcare.