What is DA and Types of Dearness Allowance in Salary

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

Dearness Allowance

The Dearness Allowance was earlier called Dear Food Allowance which is later renamed as DA for the Government Employees, and 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 which is applicable for employees based on their organization of work, which is purely named as Industrial DA and Central DA (Variable).

Dearness Allowance for Employee

Industrial DA = The Industrial Dearness Allowance (IDA) is applicable to employees for public sector enterprises and 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 will be calculated and the new figure will be announced for implementation since then.

Central Dearness Allowance (CDA) Rates Calculation

The Dearness Allowance is calculated from the basic salary of an employee with a defined formula, as the Government revises this DA, the same will be different based on the locations which are directly related to the cost of living, and it does make clear that the employees from the rural sector, semi-urban sector, and the urban sector have a different DA.

According to the sector, the IDA rates will be calculated 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 Dearness Allowance

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.

Frequently Asked Question

Is Dearness Allowance applicable for Private sector employees?

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

Is DA included with Basic Salary of an employee?

  • No, the DA is a special component of employee salary which is calculated based on the 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.

When Does the Dearness Allowance for Pensioners take place?

  • The DA for the prisoner of the central government employee or public sector employee will be whenever the pay commission has been released, and Whenever the DA percentage is revered through the pay commission, the same will be reflected every pensioner account and will be added from the next agreed date.

Is HRA and DA calculated similarly?

  • The DA and HRA are both different components of one employee salary which is calculated based on their Basic salary differently, and 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.