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The full form of DA is Dearness Allowance. It is a measure of salaries and inflation paid to government employees, pensioners, and public sector employees in Pakistan, Bangladesh, and India. This value is paid to government employees to help them adjust their expenses to the inflation rate. Dearness Allowance is granted as a percentage of the basic salary. This percentage is paid as a lump sum by the government without any deductions.
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DA Calculation
The Dearness Allowance component was introduced in India by the British government after World War II. In Independent India, the concept of DA was introduced in the late 1950s and early 1960s. Recently, the government of India changed the DA calculation in 2006 and is currently applicable in the nation.
Keep reading to learn how DA is calculated for employees of different sectors.
Central Public Sector Employees
Dearness Allowance calculation for central public sector employees is given below:
DA%= ((AICPI Average (Base Year – 2001=100) for last 3 months -126.33)/126.33) *100
Central Government Employees
Dearness Allowance calculation for central government employees is as follows:
DA%= ((AICPI Average (Base Year – 2001=100) for last 3 months -126.33)/126.33) *100
ACPI means All India Consumer Price Index
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Types of Dearness Allowance
Government enterprises and the central government of India calculate DA as Variable DA or Industrial DA.
Variable Dearness Allowance
Variable Dearness Allowance (VDA) is an allowance provided to central government employees, which is revised every six months. It is determined by considering the changes in the Consumer Price Index (CPI), resulting in an adjusted figure. This adjusted figure is known as Variable Dearness Allowance. Based on this, the employees’ DA is updated and implemented. VDA comprises three components: the CPI, the base index, and the fixed variable DA amount set by the Indian government. The fixed variable DA amount remains unchanged until the government revises the minimum wages, while the base index also remains constant for a specific period. Only the CPI fluctuates each month, impacting the overall value of VDA.
Industrial Dearness Allowance
Industrial Dearness Allowance (IDA) is a perk offered to employees working in public sector enterprises. The Indian government has recently raised the IDA for this sector by 5%. This increase applies to all board-level executives, officers, and staff members employed in central Public Sector Undertakings (PSUs). To mitigate the impact of the country’s increasing inflation, the IDA for government sector enterprises is revised every quarter, taking into account fluctuations in the CPI.
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