New Delhi:
A new update has been made as the Dearness Allowance (DA) is expected to rise in July this year. As per the Inflation and Industry Index, an increase of 5% in DA is expected. After 2019, this is the first time when such a hike is expected. However, the problem is that the DA formula has changed.
DA is given to the state and the Central government employees to improve their lives. This is part of the salary structure, therefore it safeguards the employees against the rising inflation.
What is the new 7th Pay Commission formula?
Labour and Employment Ministry has changed the method to calculate the DA. For the calculation, the Ministry has changed the 2016 base year. Now, the Ministry has added one more index — WRI. The Ministry said that the base year 2016=100, with WRI, will change a new base year chain of 1963-65.
How the DA will be determined?
The amount of DA and the current rate of the 7th Pay Commission DA are obtained after multiplying the net salary which is currently at 12%. For Example, if your net salary is 56,900, then the will be ascertained by this mathematical calculation (56,000 x 12)/100. DA’s percentage = the average of the last 12 months’ CPI – 115.76. The last amount is divided by 115.76 and whatever amount we get; we multiply it by 100.
Salary Calculation
To calculate the salary under the 7th Pay Commission, DA is calculated as per the net salary. For example, if an employee’s minimum net salary is 25,000, then his/her DA will be 34 of this amount.
Tax on DA
DA is taxable. Under the Income Tax Returns rules of India, a person is expected to provide DA information separately. In simple terms, employees need to pay tax on the DA amount which has to be paid.
Types of DA
DAs are of two kinds: Industrial DA and Changeable DA. Industrial DA is amended every three months. This is for central government employees who work in the public sector. It is evaluated under CPI. Changeable DA is amended every six months. It is also evaluated under the CPI.
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