Home / Money / Personal Finance /  DA likely to be hiked by 4%: Here's how dearness allowance on your salary will rise

The government is likely to raise the dearness allowance for more than one crore employees and pensioners by another 4%. This would take DA to 42% from the current 38%. DA is revised periodically twice a year on a half-yearly basis, and it is calculated as a percentage of the basic salary of employees.

DA means a cost-of-living adjustment that is offered to these employees. The government pays DA to help employees cope with stubbornly rising prices which is due to high inflation. However, in recent months, there has been significant easing in consumer price index (CPI) inflation.

Shiva Gopal Mishra told PTI on Sunday, "the CPI-IW for December 2022 was released on January 31, 2023. The dearness allowance hike works out to be 4.23 per cent. But the government does not factor in hiking DA beyond decimal point. Thus DA is likely to be increased by four percentage points to 42 per cent."

Generally, the payment on account of DA involving fractions of 50 paise and above may be rounded to the next higher rupee and the fractions of less than 50 paise may be ignored, as per Finance Ministry guidelines.

Further, Mishra explained that the expenditure department of the Ministry of Finance will formulate a proposal to hike DA along with its revenue implication and will put up the proposal before the Union Cabinet for approval.

Dearness allowance calculation:

For central government employees: The DA is calculated as -- {(Average of the All-India Consumer Price Index (Base year -2001 =100) for the last 12 months -115.76)/115.76} x 100.

For central public sector employees, the DA is calculated as --- {(Average of the All-India Consumer Price Index (Base year -2001 =100) for the last 3 months -126.33)/126.33} x 100.

Last year, in September, the government raised DA by 4%, taking the rate to 38% with effect from July 1, 2022. This was an increase from 34% between January to June 2022.

If DA is hiked to 42%, then employees' dearness allowance on their salary will also jump. Notably, DA is different depending upon the level of the pay matrix of an employee. The higher your pay matrix, the higher is DA!

For example:

Level 1 grade pay:

For instance, the basic salary under level 1 of the 1800 grade pay scale for employees, is 18,000 per month.

With DA at 42%, the dearness allowance would come at 7,560 on the mentioned salary (42% of 18,000 pm).

At 38%, the dearness allowance comes around to 6,840 (38% of 18,000 pm).

This would be an increase of 720 in dearness allowance at 42%.

Level 9 grade pay:

Under level 9 of 5400-grade pay, the basic salary is 53,100 per month. At 42%, the dearness allowance would be 22,302 on this basic salary, while at 38% --- it would be 20,178.

Hence, DA will rise by 2,124 from January 1, 2023, compared to the dearness allowance received between July 1, 2022, to December 31, 2022.

The Labour Ministry revises DA in view of the inflation of many important things in the AICPI (All India Consumer Price Index) index.

At present, India's inflation is at 5.72% in December 2022, becoming the second month in a row when CPI has stayed below RBI's upper tolerance limit of 6%. This is the lowest reading in CPI since December 2021. CPI was above RBI's tolerance limit from January 2022 to October 2022 before easing.

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