(IDA) applies to the Public sector employees of Central Government. As per the 6 th pay commission the rate in 2015 January was 113% where the rate has increased to 119% in July 2015. However, a revision will be put in to effect on July 1st, 2021 and this will also take the previous hikes under consideration. So, while the cost of living keeps on rising, Dearness Allowance (DA) is paid by the government to its employees to offset the inflation impact and help them cope up with the rising prices. Several other components are then calculated added in respect to the basic salary and are then added to it to calculate the take-home amount. It is a fixed percentage of the basic salary aiming to hedge the impact of inflation. If the decision is made in favour of the employees, it would significantly boost their salaries. For more than 11 million employees, the Dearness Allowance was increased to 7% from an earlier rate of 5%. This also includes the periodic reviewing and updating the multiplication factor for calculation of DA. 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. Union Minister Prakash Javadekar said that the government has increased the Dearness Allowance to 17% from 12%. Our article Salary,Allowances,Dearness Allowance,Government Salary, Pay Commission discusses it in detail Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. is not granted to pensioners while they are staying in any place outside India during reemployment. Basic Salary – Definition. In case employees are provided with rent free accommodation that is unfurnished wherein all prerequisites are met, Dearness allowance is a part of the salary to the extent wherein it forms a part of the retirement benefit salary. Furthermore, Javadekar said mentioned that the previous hikes have been limited to 2% to 3%. In fact, the law also requires to maintain the basic salary and dearness allowance in such proportion. The salary is taken for the period the employee occupies the accommodation. CAs, experts and businesses can get GST ready with ClearTax GST software & certification course. Nearly 50 lakh government employees and 65 lakh pensioners will be benefited from this hike. Once in twice or once in six months, the percentage of Dearness Allowance is increased based on the Consumer Price Index for Industrial Workers Base Year 2001=100. Dearness Allowance too, is taken into account for rolling out the next pay commission report. For example, the existing rate of percentage is 12%, if your basic salary is Rs. DA component of the salary is applicable to both employees in India and Bangladesh. According to various sources, 40% of the arrear amount between January 1st, 2016 and August 31st, 2017 was disbursed during the financial year 2017-2018. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Except for this, in all other cases of reemployment, D.A. If an employee does not receive a commission or a dearness allowance, then the HRA will be around 40% - 50% of his/her basic salary. during Income Tax Return (ITR) filing. From the year 1996, DA has been included to compensate for price rise or inflation in a particular financial year and hence it is revised twice every year, once in January and then in July. The state government will, however, continue to pay the DA and DR at the rate of 17%, but the employees and pensioners will not receive the arrears was due from July 1, 2020 and January 1st, 2021. The figure currently stands at 50% of the basic salary. The central govt employees and pensioners will now keep receiving the DA at the rate of 17% till July 2021. Pensioners who are staying abroad without reemployment are allowed to receive D.A. The effective salary of government employees requires constant enhancement to help them cope up with the increasing prices. Each month, a certain percentage of your salary (usually, a percentage of your Basic Pay) is invested in it. This decision is set to benefit all board level executives, officers and employees of central PSUs. The Chief Minister of Odisha announced on February 14th, 2020 a 5% increase in Dearness Allowance (DA) for government employees. However, if a salaried employee is provided with an unfurnished accommodation which is rent-free, after the fulfilment of all the pre-requisites, D.A. On the basis of the recommendation of the 7th Pay Commission, the cost of this hike will go up to Rs.16,000 crore and will be effective from July 2019. According to the statement, when the government takes a decision to release the future instalments of the Dearness Allowance and the Dearness Relief which is due from 1 July 2021, the rates of the DA and the DR will be restored and will be subsumed in its cumulative revised rate which will be effective from 1 July 2021. Dearness allowance is given to the employees as per their basic salary. The Income Tax Act mandates that tax liability for Dearness allowance will have to be declared in the filed returns. In order to calculate the HRA, the salary is defined as the sum of the basic salary, dearness allowances and any other commissions. differs for the employees depending on their work location. As per the recent announcement by the central Government in Budget 2018, the Dearness Allowance was hiked by 2%. The government has recently announced through an office memorandum that it has decided to put the hikes on the dearness allowance (DA) on hold for pensioners and govt employees till the month of July 2021. D.A. Indian citizens may receive a basic salary or pension that is then … One significant difference is that HRA applies to both private and public sector employees, while only public sector employees are entitled to DA. Despite several measures by the government to control the rate of inflation, only partial success has been achieved because the prices move according to the market. January 2020. The current rate of Dearness allowance multiply with your basic salary is Dearness allowance. 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. Also, under the Income Tax Act, 1961, it is mandatory to declare one’s tax liability for D.A. A percentage of the salary has been paid to the employee as his / her cost of living. 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. turns into that part of the salary which forms a component of retirement benefit salary. Yes, D.A. That means the rate gets hiked by 6% for the central government employees. (VDA) applies to the employees of the Central Government. Dearness Allowance Calculations. This means, an employee receives a specific percentage of his/her original pension as D.A. No, Dearness Allowance and House Rent Allowance are two different items of you Salary. Dearness Allowance Means: In India, Dearness allowance (D.A.) It is revised every six months according to the Consumer Price Index to help offset the impact of rising levels of inflation. File before 30th Nov to get assured rewards worth. What is Dearness Allowance? Dearness Allowance increased by 5% from 12% to 17% from July 2019. Basically, Dearness Allowance is understood as a component of salary which is a fixed percentage of an employee’s basic salary, which aims to hedge the impact of inflation. It is a part of your take-home amount. It is revised every six months according to the Consumer Price Index to help offset the impact of rising levels of inflation. It is paid by the government to employees of the public sector and pensioners of the same. © 2021 ‐ Defmacro Software Pvt. As the impact of inflation varies according to the location of the employee, dearness allowance is calculated accordingly. remains fixed unless the government revises the basic minimum wages. Dearness Allowance can be basically understood as a component of salary which is some fixed percentage of the basic salary, aimed at hedging the impact of inflation. The Income Tax rules in India require the dearness allowance component to be mentioned separately in the returns that have been filed. Industrial dearness allowance or IDA is the allowance applicable to employees of the public sector enterprises. Since D.A. The formula to calculate the dearness allowance was changed in 2006 by the Government. But there is no hard rule to say that the Basic + DA should be 70%. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. This merging results in a significant hike in the salary of the employees. If total percentage of literate men is 35 of the total population, write a program to find the total number of illiterate men and women if the population of the town is 80,000. 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. Since, DA is directly related to the cost of living, the DA component is different for different employees based on their location. Dearness Allowance must not be confused with the HRA as they are two separate components and are treated differently for income tax. Uh-oh! This number appears incorrect / invalid. You will receive a call shortly from our customer support. It is the responsibility of the pay commissions to take into account every factor that helps with the calculation of the salaries. It solely depends on employers. DA to private sector employees is not mandatory by law. is granted along with fixed pay or time scale. Update: Dearness Allowance for Central Government Employees was continued to be calculated after implementation of 7th Pay Commission based on consumer price index with … As a rule, it is practice to merge the DA with the basic salary once the DA percentage breaches the 50% mark. All public sector employers pay basic salaries to their employees according to the respective pay scale. Dearness Allowance increased by 5% from 12% to 17% from July 2019. Download ClearTax App to file returns from your mobile phone. Since the year 2006, the dearness allowance for employees from the public sector has been continuously growing. Similarly, whenever the D.A. This means DA is different for employees in the urban sector, semi-urban sector or the rural sector. No, the private sector employees in India are not entitled to receive Dearness Allowance as a part of their salary. According to various sources, the increase in DA will benefit around 3.5 lakh employees. Tip. No, the private sector employees in India are not entitled to receive Dearness Allowance as a part of their salary. It, therefore, becomes essential for the government to shield its employees from the adverse effects of inflation. VAD or Variable dearness allowance is the allowance that comes as a result of revision every six months for central government employees. Pensioners who are reemployed under the State government, Central government, an Autonomous or local body, or government undertakings, don’t have the eligibility to draw Dearness Allowance in cases where D.A. Normally, the Basic Salary is the actual salary and DA is taken as a percentage of this basic. Ltd. All public sector employers pay basic salaries to their employees according to the respective pay scale. Dearness Allowance is planned as a percentage of an Indian citizen’s basic salary to lessen the force of inflation on people. The demand has been raised with the Government, and a decision is soon expected on these lines. Latest News: Goverment put on Hold to Dearness Allowance hike due to Coronavirus impact. Presently, DA is calculated as per the following formula: % 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, % 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. The DA calculation formula was revised and changed after 2006. Efiling Income Tax Returns(ITR) is made easy with ClearTax platform. Based on this figure, the DA of employees is revised and rolled out. Display of any trademarks, tradenames, logos and other subject matters of intellectual property belong to their respective intellectual property owners. The Dearness Allowance is a calculation on inflation and allowance paid to government employees, public sector employees and pensioners in India, Bangladesh and Pakistan. in order to compensate for inflation or price rise. Since, DA is directly related to the cost of living, the DA component is different for different employees based on their location. It is mandatory for you to contribute 12% of your basic … Thus, DA varies from employee to employee based on their presence in the urban, semi-urban or rural sector. Salaried individuals who live in a rented house can claim HRA to … The union cabinet is expected to take a decision on this matter soon. 7th Pay Commission latest news today: For all central government employees waiting for the Dearness Allowance (DA) announcement for January to June 2021 period, there is a piece of good news. Dearness allowance is a cost of living adjustment allowance paid to the government employees and pensioners.It is one of the components of salary, and is counted as a fixed percentage of the person's basic salary.It is adjusted according to the inflationary trends to lessen the impact of inflation on government employees. 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