Dearness allowance (DA)
Dearness Allowance (DA): In the public sector, Employers receive a basic salary according to their pay scale. The basic pay comprises many components like DA and other allowance. Do you know the DA full form in salary? If not, this content will explain to you all about it.
DA is the main component of the salary. DA is a percentage of the basic wages to meet the impact of inflation. Dearness Allowance is directly related to the cost of living and varies according to employees and locations.
Dearness Allowance: Meaning
DA full form in salary is Dearness Allowance which depends on the cost of living of the employees of the public sector and pensioners as well. The Indian and Bangladesh governments offer DA to their employees.
Inflation is an increasing issue in the country, and the employee’s salary needs enhancement regularly to meet the impacts of inflation. The government is incapable of controlling inflation, but it shields its employees from the adverse effects of inflation and offers a Dearness allowance to them. Inflation varies from locality to locality, so the DA does. Dearness allowance is different in Rural, urban and semi-rural areas.
Dearness Allowances: Types
Now that the DA full form in salary and its meaning is clear to you. Let’s learn about the types of Dearness allowance. DA is categorized into two types as per calculations:
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Industrial dearness allowance
The public sector offers Industrial Dearness Allowance to the employees. IDA undergoes revision every quarterly depending on the customer Price Index.
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Variable Dearness allowance
Variable Dearness Allowance is offered to the central government employees and is revised half-yearly according to the Customer Price index. VDA includes three different components:
- Base Index- The basic index remains fixed for a particular period.
- Customer Price Index- It changes every month, thus leaving a considerable impact on VDA.
- Variable DA amount fixed by the government- It remains the same unless the revision of basic pay.
How does Income Tax treat the Dearness Allowance?
According to the AY 2017-18, DA is taxable for salaried individuals. If the employee gets the rent-free unfurnished accommodation with all prerequisites, DA becomes part of the salary. It forms a contribution to retirement benefit salary, The Income tax demands employee to declare the tax liability on DA in ITR.
Dearness allowance Calculation in July 2022
The Dearness Allowance is calculated twice a year, i.e., in January and July.
The formula for calculating the dearness allowance for central government employees is:
Percentage of DA = {All India Customer Price Index for last 12 months (Base year-2001 = 100) -115.76)/115.76}x100
The DA allowance formula for central public employees:
Percentage of DA = {All India customer price index Average (Base year-2001 = 100) for last 3 months-126.33)/126.33}x100
The ministry of labor and employment recently modified the formula for DA calculation. As per the new rule, the new WRI series with the base year 2016 = 100 will replace the current base year 196.-65.
This change has increased the index performance and broadened the range.
Pay commission’s role in the Dearness allowance Rate calculation
The pay commission of India regularly reevaluates the salary of the public sector employees while considering the various components of the Monthly Pay. Dearness allowance is also one of the vital components of the wages, so it is also taken into account to make the pay commission report. The reviewing and changing of the multiplication factor come under the pay commission role.
What is the current DA for government employees in July 2022?
The table contains the summary of the current DA of central and state government employees (effective from 1.1.2022):
| Description | Dearness Allowance Percentage |
| Central Government DA | 34% |
| TN Government DA | 31% |
| Rajasthan Government DA | 34% |
| Maharashtra Government DA | 34% |
What is Dearness Allowance?- FAQs
Q1. What is the DA full form in salary?
Ans. The DA full form in salary is Dearness Allowance which is provided to the government employees to face the ever-increasing inflation.
Q2. How does the DA change according to the location of the employees?
Ans. As the effect of inflation varies from urban to rural areas, the DA also changes according to rural, semi-rural, and urban areas.