Dearness Allowance (DA) is a cost-of-living adjustment, an increase made to the basic pay of government officials and public sector workers’ employees. Public sector companies employees are also counted as public sector workers, but not civil servants. Some private sector employees, specially in large legacy companies also receive dearness allowance.

Dearness Allowance is calculated as a percentage of an Indian citizen's basic salary to mitigate the impact of inflation on people. Indian citizens may receive a basic salary or pension that is then supplemented by a housing or a dearness allowance, or both. The guidelines that govern the Dearness Allowance vary according to where one lives. Dearness Allowance is a fully taxable allowance.

The two types of Dearness Allowance are: Dearness Allowance given under terms of employment. Dearness Allowance not given under the terms of employment.

History The Dearness Allowance was introduced following the second World War, and was then known as the "Dear Food Allowance". The "Old Textile Allowance" was also introduced in 1947, though this was revised and reintroduced in 1953 as the "Revised Textile Allowance". Initially DA was given in response to demand of employees for wage revision. Later it was linked to Consumer Price Index. In the past various committees have been constituted to look into the issue of payment of DA to Central Government employees.The 3rd Central Pay Commission recommended payment of DA whenever the CPI rose by 8 points over the index of 200 (with base 1960 = 100). The extent of neutralization granted with effect from 1 January 1973 ranged from 100% to 35%.The 4th Central Pay Commission recommended the grant of DA on a 'percentage system' of the basic pay (1986). It also recommended payment of DA twice a year; 1 January and 1 July. Each installment of DA was to be calculated with reference to the percentage increase in the 12 monthly average of All India Consumer Price Index (base 1960). The extent of neutralization now ranged from 100% to 65%.The 5th Central Pay Commission looked into the issue of differential neutralization and found it to be injustice to senior officers and recommended uniform neutralization of 100% to employees at all levels. The Commission had suggested that dearness allowance should be converted into dearness pay every time the cost of living rises by 50% over the base level. The 6th Central Pay Commission recommended revision of base year of the Consumer Price Index (CPI) as frequently as feasible.It also changed base year for DA calculation to 2001 (base year 2001=100)

Calculation sheet

Formula for calculating Dearness Allowance for Central government employees from 1 January 2006 is :

Dearness Allowance %= {(Average of year 2001=100) for the past 12 months – 115.77)/115.77}*100

In October 2021, the government revised the Consumer Price Index for Industrial Workers (CPI-IW) base year from 2001 to 2016. A linking factor of 2.88 was defined for converting the new series with the base 2016=100 to the previous series on base 2001=100. Based on this, the DA is currently calculated with the following formula

DA  = (A  – 261.4)*100/(261.4) Where A = Avg of CPI-IW (base 2016=100) for the past 12 months x linking factor of 2.88

Formula for calculating Dearness Allowance for Central public sector employees from 1 January 2007 is :

Dearness Allowance %= {(Average of year 2001=100) for the past 3 months - 126.33)/126.33}*100

Dearness allowance with effect from January or July of a particular year in the future, once the for a particular month is published by the Government, whereas for PSU employees it is declared quarterly by DPE (Department of Public Enterprise).

Beginning 1 January 1996, the Dearness Allowance is granted to compensate for price increases to which the revised pay scales relate. This will be reviewed twice a year, on 1 January and 1 July.

The following table shows All India Consumer Price Index since 1 January 2006 with Base year 2001=100

Year Jan Feb March April May June July Aug Sept Oct Nov Dec Average2006 119 119 119 120 121 123 124 124 125 127 127 127 123 2007 127 128 127 128 129 130 132 133 133 134 134 134 1312008 134 135 137 138 139 140 143 145 146 148 148 147 141.662009 148 148 148 150 151 153 160 162 163 165 168 169 1572010 172 170 170 170 172 174 178 178 179 181 182 185 175.92011 188 185 185 186 187 189 193 194 197 198 199 197 191.52012 198 199 201 205 206 208 212 214 215 217 218 219 209.332013 221 223 224 226 228 231 235 237 238 241 243 239 232.162014 237 238 239 242244 246 252 253 253 253 253 253 246.912015254 253 254 256 258 261 263 264 266 269270 269 261.422016269267 268 271275 277 280 278 277 278277 275India GP Indiceslabourbureaunew.gov.in December 2016 274.332017 274274India GP Indiceslabourbureaunew.gov.in February 2017 275277 278 280Data June 2017labourbureaunew.gov.in 285Data July 2017labourbureaunew.gov.in 285Data August 2017labourbureaunew.gov.in 285Data September 2017labourbureaunew.gov.in 287Data October 2017labourbureaunew.gov.in 288 286281.1672018288 287 287 288 289 291301301 301 302 302 301 294.332019307314320322 325328 The DA Rate for Industrial Workers (since 1 January 2007 with Base year 2001=100) for 3rd Quarter (Oct-Dec), 2015 has been declared as 107.9% and that of 4th Quarter (Jan-Mar), 2016 is 112.40%.

The 5th Pay Commission recommendations were implemented since 1 January 1996 and consequently DA rate with effective from 1 January 1996 became 0. Further in 1994 Central Government merged 50% of the Dearness Allowance (DA) with the basic pay with effective from 1 April 2004 and the Dearness Allowance continued to be calculated with reference to the All IndiaConsumer Price Index for Industrial Workers (AICPI-IW) average as on 1 January 1996 of 306.33 without changing the index base consequent to the merger. Accordingly, Dearness Allowance (DA) as mentioned in table below were sanctioned from 1 July 2004 till 1 July 2007. Year 199619961997199719981998199919992000200020012001200220022003200320042004200520052006200620072007MonthJan JulyJan JulyJan JulyJan JulyJan JulyJan JulyJan JulyJan JulyJan JulyJan JulyJan JulyJan JulyDA % 04 813 1622 3237 3841 4345 4952 5559 61646771 74798591DA% after 50% merger in 1.3.2004-----------------14172124293541

DA rate as applicable after implementation of 6th Pay Commission recommendations with effective from 1 January 2006 is shown in table below :- Year 20062006'07'07'08'08'09'0920102010'11'11'12'12'13'13'14'14'15'15'16'16'17'17'18'18'19'19MonthJan JulyJan JulJan JulJan JulJan JulJan JulJan JulJan JulJanJulJanJulJanJulJanJulJanJulJanJulDA %0269121622273545515865728090100107113119125 132136139142148154164

DA rate as applicable after implementation of 7th Pay Commission recommendations with effective from 1 January 2016 is shown in table below :-

Print media workers

For print media workers the Government of India has notified a DA Formula in the Gazette No 2532(E) of 11 November 2011, as recommended by the Majithia Wage Board for Journalists and Non-Journalists. The said Gazette notified formula was subsequently upheld by the Supreme Court of India by its judgment made on 7 February 2014. The Supreme Court of India upheld the recommendations as 'revised and determined' by Justice (retd) Majithia. While 115.76 is the Base and Divisor for Central Government staff, for employees coming under Majithia Wage Board 167 had been recommended as Base and Divisor. The said 167 is the 12-month average of 1 July 2009 to 30 June 2010.

The average for the current DA period January to December 2017 is 274, which is the 12-month average AICPI-IW of 1 January 2016 to 31 December 2016. The DA calculation for Jan 2017 to June 2017 is 274 minus 167 * Basic Pay and the result divided by 167. Total points 107.

7th Pay Commission Dearness allowance rate applicable after implementation of 7th Pay Commission recommendations with effective from 1 January 2016 as shown in table below. Accordingly the Nodal Authority Department of Expenditure, Ministry of Finance has issued the Office Memoranda as cited below:-

Year 201620162017201720182018201920192020202020212021202220222023202320242024202520252026MonthJan JulyJan JulyJan JulyJan JulyJan JulyJanJulyJanJulyJanJulyJanJulyJanJulyJanDA %0245791217 17 17 17 28 31343842465053555860

Pensioners Both pensioners and their families are granted DA and this continues following reemployment with the Government of India or State Governments, a public sector undertaking, autonomous bodies or a local body; that is, DA is allowed in addition to a recipient's fixed pay or "time scale". In other cases of reemployment, access to DA is subject to the limit of emoluments last drawn.

DA is not allowed during a pensioner's time overseas if employment is undertaken. It remains accessible to overseas pensioners whilst the recipient is not employed.

Since 1 October 1984, pensioners are paid DA at a certain percentage of basic pension. This is calculated on the original pension without commutation. Since 1 July 1986 the percentage has been revised every six months based on the cost of living index.

References

DA Calculator for PSU employees DA Calculator for CG employees

Time Interval for revision of dearness allowance

Confirm! DA/DR from July, 2019: 5% increase in 7th CPC DA @17% and 10% increase in 6th CPC DA @ 164%

External links Dearness Allowance: Meaning, Types, DA Calculation and Revised Rates Government of Tamil Nadu, Directorate of Pension - Dearness Allowance Government of Tamil Nadu, Directorate of Pension - Dearness Allowance Rate Tables Indian Banks Association - Dearness Allowance for Bank Employees Dearness allowance 5% DA Hike Order, July 2019 Dearness allowance DA Rates Table for Central government employees