What is DA and Types of Dearness Allowance in Salary

Dearness Allowance is roughly termed as cost of living adjustment. DA is a compensatory allowance offer to public sector employees along with pensioners. DA is a component in salary which is applicable to every employee in India.

Dearness Allowance

The Dearness Allowance earlier called Dear Food Allowance, and later rename as DA for the Government Employees. This gets to add to every individual salary on a percentage basis as per the Consumer Price Index number for each quarter which in result in salary revision.

There are two types of DA applicable for employees based on their organization of work. This is purely name as Industrial DA and Central DA which is variable.

Industrial DA

The Industrial Dearness Allowance (IDA) is applicable to employees for public sector enterprises. This will be revised for every 3months based on Consumer Price Index numbers announcement, The employees under Central PSUs will be benefited from this announcement.

Industrial Dearness Allowance (IDA) Rates Calculation

Central DA

The Variable DA or Central Dearness Allowance (CDA) is based on the revision for every six months for Central Government employees and pensioners, and the new figure of DA will be a result of the consideration of the past 6 months DA with calculating the increased or decreased consumer price index.

Based on the consumer value the DA calculated and the new figure announced for implementation since then.

Central DA (CDA) Rates Calculation

The Dearness Allowance calculates from the basic salary of an employee. It calculates as per defined formula and Government revises this DA. The same will be different, based on the locations.

DA is directly related to the cost of living. It does make clear that the employees from the rural sector, semi-urban sector, and urban sector have a different DA.

According to sector, the IDA rates may calculate differently for Banks and Insurance as per the pay revision and DA merger and the link point taken. Let’s have a look at DA for the following sector

Banking Sector Employee DA Rates

Insurance Employee IDA

Dearness Allowance News

08.03.2021: Union Government is likely to announce 8% DA and DR for Central Government employees as well as for Pensioners from April 2021, which reaches to 25% as total DA. Also, PSU IDA may paid at enhanced rates in regular from 01.07.2021.

  1. Is Dearness Allowance applicable for Private sector employees?

    No, the private sector employees of Indian territory not entitled to receive the DA in their salary, and this is applicable for the government sector employee and respective pensioners with the defined rate of percentage. There is directly impact on the consumer index price that does make a lot of differences.

  2. Will DA included with Basic Salary of an employee?

    No, the DA is a special component of employee salary calculates on Basic Salary. The DA will not be more than the Basic salary or will not be less than 12 percent of the basic salary. As per the current update, the DA is at 50% of the basic salary for every employee which differs slightly based on their area of interest.

  3. When Does the Dearness Allowance for Pensioners take place?

    The DA for the pensioner or the central government employee or public sector employee will be whenever the pay commission released or in force. Whenever the DA percentage revised, the same reflects in every pensioner account and adds from the next agreed date.

  4. Is HRA and DA calculated similarly?

    The DA and HRA are both different components of one employee salary. This will calculate based on their Basic salary differently. There is no similarity in the formulae or the alignment of the Dearness Allowance with House rental allowance, making it perfect for employees to have their easy cost of living.