"The Union Cabinet chaired by the Prime Minister, Narendra Modi, today has given its approval to release an additional instalment of Dearness Allowance to Central Governments employees and Dearness Relief to Pensioners with effect from 01.01.2023. The additional instalment will represent an increase of 4% over the existing rate of 38% of the Basic Pay/Pension, to compensate against price rise," according to a press note from Cabinet.
"The combined impact on the exchequer on account of both Dearness Allowance and Dearness Relief would be Rs.12,815.60 crore per annum. This will benefit about 47.58 lakh Central Governments employees and 69.76 lakh pensioners. This increase is in accordance with the accepted formula which is based on the recommendations of the 7th Central Pay Commission," it further added.
DA is a component of the salary paid to Central Government employees to offset the impact of inflation on their earnings. It is calculated as a percentage of the employee's basic salary and is typically adjusted twice a year, in January and July.
DA rate may vary depending on the employee's location and classification. For example, employees in metropolitan cities receive a higher DA compared to those in non-metropolitan cities due to the difference in living costs. Employees in different sectors, such as railways and defense, may have different DA rates.
DA Calculation
DA percent for central government employees is calculated using the formula ((Average of AICPI (Base Year 2001=100) for the past 12 months -115.76)/115.76) *100. For public sector (central government) employees, the formula is ((Average of AICPI (Base Year 2016=100) for the past 3 months -126.33)/126.33) *100.
Salary increase after DA hike
From a salary perspective, if a central government employee has a basic pay of Rs 18,000, then dearness allowance amounts to Rs 6,840 rupees at a rate of 38%. However, with the DA increasing to 42%, the employee's DA will increase to Rs 7,560.
Looking at the maximum basic pay, which is Rs 56,000, the dearness allowance would be Rs 21,280. With a four percent increase, it will rise to Rs 23,520. Employees with a minimum basic salary will benefit from an increase of Rs 720 rupees per month and Rs 8,640 annually.
