Dearness allowance (DA) - Meaning, Calculation, Types and More

About Dearness Allowance

Dearness Allowance is an element of salary paid, to staff members, to tackle inflation. All public sector establishments pay basic wages to their workforce, as per the specific one-to-one pay scale. Several additional components are then computed and added to each individual’s basic salary to compute the net take-home amount, post deductions – one such imperative additional component is Dearness Allowance (DA). The cabinet office has announced, earlier this year, that it has sanctioned a 3% hike in DA. This implementation will help more than 1 crore people – 62.03 lakh pensioner and 48.41 lakh central government employees, beginning 1 January 2019. The increased DA percentage will cost the Indian government ~Rs.9,200 crore each year. India’s Finance Minister, Arun Jaitley, announced a 3% increase, hence, this took the Dearness Allowance and Dearness Rate (DR) for pensioners to 12% from the previous rate of 9%.

The actual salary of government personnel requires a constant boost to aid the government employees to deal with increasing prices. Though several efforts have been made to control the price increase of commodities, however, the prices move as per the market’s demand. For that reason, it becomes essential for the government to protect its employees from the adverse effects of price rise. Additionally, it must be noted that Dearness Allowance differs from employee to employee depending on their geographical presence i.e. rural, semi-urban, or urban sector.

Dearness allowance (DA) - Meaning, Computation, Types and More

Calculation of Dearness Allowance (DA)

Dearness Allowance is made available to government employees to safeguard against inflation in a specific financial year, and it is computed twice each year – once in January and the other in July. The formula to compute DA was altered in 2006 by the Indian Government.

Currently, Dearness Allowance is computed as per the below mentioned formula:

For Central Government employees, the formula is:

Dearness Allowance %age = [(Mean of the All-India Consumer Price Index (Base year: 2001 =100) for the previous 12 months - 115.76)/115.76] x 100

Formula for central public sector employees:

Dearness Allowance %age = [(Mean of the All-India Consumer Price Index (Base year: 2001 =100) for the previous 3 months -126.33)/126.33} x 100

Types of Dearness Allowance

For computation purpose, Dearness Allowance is divided into two distinct categories, namely, Variable Dearness Allowance (VDA) and Industrial Dearness Allowance (IDA). Below mentioned are the details of both type of allowances:

Variable Dearness Allowance (VDA)

Variable Dearness Allowance (VDA) is applicable for all the Central Government employees. It is reviewed after every six months, as per the Consumer Price Index (CPI), to aid in offsetting the influence of increasing levels of inflation. VDA, in itself, is reliant on three diverse components as mentioned below:

Base Index – this is kept fixed for a specific period
Consumer Price Index (CPI) – influences VDA as it moves up and down each month
Amount corresponding to Variable Dearness Allowance, which has been set by the Indian Government, remains fixed except if the government reviews or alters the basic minimum wages

Industrial Dearness Allowance (IDA)

Industrial Dearness Allowance (IDA) is applicable for Public sector workforce of Central Government. The IDA goes through a revision each quarter, and the revision is subjective to the Consumer Price Index to help balance out the impact of increasing inflation.

Dearness Allowance and Income tax

For salaried employees, Dearness Allowance is fully taxable. In India, the income tax rules require the DA element to be stated distinctly in the tax returns that are filed at the end of the financial year

Dearness Allowance and Pay Commissions

The Pay Commission assesses and amends the salaries of public sector workforce based on numerous components that form part of the initial salary of a member of staff. For that reason, Dearness Allowance, too, is well-thought-out by the Pay Commissions while organising the pay commission reports. It’s the accountability of the Pay Commission to consider each factor that assists with the computation of public sector employees’ salaries. This also comprises the periodic rereading and bringing up to date the multiplication factor for computation of Dearness Allowance.

Highlights of 7th Pay Commission

Grade Pay and pay band will be replaced by a new system of Pay Matrix
A factor of 2.57 will be applicable consistently to the prevailing pay, of all government employees, to reach the new pay scale
Under the 7th pay commission, Rs.18,000 is the minimum pay
Maximum suggested pay will be set at Rs.2,25,000
Top positions such as cabinet secretary and others in the similar level: Pay starts at Rs.2,50,000
Annual increment rate is fixed at 3%, as it was in the 6th Pay Commission

Grade Pay v/s Pay Matrix

Previous Pay bands (PB)	Level of Grade Pay	Applicable for	New levels (as per the Pay Matrix)
PB-1	1800	Civil	1
	1900	Civil	2
	2000	Civil, Defence	3
	2400	Civil	4
	2800	Civil, Defence	5
PB-2	3400	Defence	5A
	4200	Civil, Defence	6
	4600	Civil, Defence	7
	4800	Civil, Defence	8
	5400	Civil	9
PB-3	5400	Civil, Defence, Military Nursing Service (MNS)	10
	5700	Military Nursing Service (MNS)	10A
	6100	Defence	10B
	6100	Military Nursing Service (MNS)	10B
	6600	Civil, Defence, Military Nursing Service (MNS)	11
	7600	Civil	12
PB-4	7600	Military Nursing Service (MNS)	12
	8000	Defence	12A
	8400	Military Nursing Service (MNS)	12B
	8700	Civil	13
	8700	Defence	13
	8900	Civil	13A
	8900	Defence	13A
	9000	Military Nursing Service (MNS)	13B
	10000		14
Higher Administrative Grade (HAG)			15
Higher Administrative Grade+ (HAG+)			16
Apex			17
Cabinet Secretary, Defence Chiefs			18

Pay Matrix Table

PAY MATRIX TABLE
Pay Band	5200-20200
Grade Pay	1800	1900	2000	2400	2000
Level	1	2	3	4	5
1	Rs. 18,000.00	Rs. 19,900.00	Rs. 21,700.00	Rs. 25,500.00	Rs. 29,200.00
2	Rs. 18,500.00	Rs. 20,500.00	Rs. 22,400.00	Rs. 26,300.00	Rs. 30,100.00
3	Rs. 19,100.00	Rs. 21,100.00	Rs. 23,100.00	Rs. 27,100.00	Rs. 31,000.00
4	Rs. 19,700.00	Rs. 21,700.00	Rs. 23,800.00	Rs. 27,900.00	Rs. 31,900.00
5	Rs. 20,300.00	Rs. 22,400.00	Rs. 24,500.00	Rs. 28,700.00	Rs. 32,900.00
6	Rs. 20,900.00	Rs. 23,100.00	Rs. 25,200.00	Rs. 29,600.00	Rs. 33,900.00
7	Rs. 21,500.00	Rs. 23,800.00	Rs. 26,000.00	Rs. 30,500.00	Rs. 34,900.00
8	Rs. 22,100.00	Rs. 24,500.00	Rs. 26,800.00	Rs. 31,400.00	Rs. 35,900.00
9	Rs. 22,800.00	Rs. 25,200.00	Rs. 27,600.00	Rs. 32,300.00	Rs. 37,000.00
10	Rs. 23,500.00	Rs. 26,000.00	Rs. 28,400.00	Rs. 33,300.00	Rs. 38,100.00
11	Rs. 24,200.00	Rs. 26,800.00	Rs. 29,300.00	Rs. 34,300.00	Rs. 39,200.00
12	Rs. 24,900.00	Rs. 27,600.00	Rs. 30,200.00	Rs. 35,300.00	Rs. 40,400.00
13	Rs. 25,600.00	Rs. 28,400.00	Rs. 31,100.00	Rs. 36,400.00	Rs. 41,600.00
14	Rs. 26,400.00	Rs. 29,300.00	Rs. 32,000.00	Rs. 37,500.00	Rs. 42,800.00
15	Rs. 27,200.00	Rs. 30,200.00	Rs. 33,000.00	Rs. 38,600.00	Rs. 44,100.00
16	Rs. 28,000.00	Rs. 31,100.00	Rs. 34,000.00	Rs. 39,800.00	Rs. 45,400.00
17	Rs. 28,800.00	Rs. 32,000.00	Rs. 35,000.00	Rs. 41,000.00	Rs. 46,800.00
18	Rs. 29,700.00	Rs. 33,000.00	Rs. 36,100.00	Rs. 42,200.00	Rs. 48,200.00
19	Rs. 30,600.00	Rs. 34,000.00	Rs. 37,200.00	Rs. 43,500.00	Rs. 49,600.00
20	Rs. 31,500.00	Rs. 35,000.00	Rs. 38,300.00	Rs. 44,800.00	Rs. 51,100.00
21	Rs. 32,400.00	Rs. 36,100.00	Rs. 39,400.00	Rs. 46,100.00	Rs. 52,600.00
22	Rs. 33,400.00	Rs. 37,200.00	Rs. 40,600.00	Rs. 47,500.00	Rs. 54,200.00
23	Rs. 34,400.00	Rs. 38,300.00	Rs. 41,800.00	Rs. 48,900.00	Rs. 55,800.00
24	Rs. 35,400.00	Rs. 39,400.00	Rs. 43,100.00	Rs. 50,400.00	Rs. 57,500.00
25	Rs. 36,500.00	Rs. 40,600.00	Rs. 44,400.00	Rs. 51,900.00	Rs. 59,200.00
26	Rs. 37,600.00	Rs. 41,800.00	Rs. 45,700.00	Rs. 53,500.00	Rs. 61,000.00
27	Rs. 38,700.00	Rs. 43,100.00	Rs. 47,100.00	Rs. 55,100.00	Rs. 62,800.00
28	Rs. 39,900.00	Rs. 44,400.00	Rs. 48,500.00	Rs. 56,800.00	Rs. 64,700.00
29	Rs. 41,100.00	Rs. 45,700.00	Rs. 50,000.00	Rs. 58,500.00	Rs. 66,600.00
30	Rs. 42,300.00	Rs. 47,100.00	Rs. 51,500.00	Rs. 60,300.00	Rs. 68,600.00
31	Rs. 43,600.00	Rs. 48,500.00	Rs. 53,000.00	Rs. 62,100.00	Rs. 70,700.00
32	Rs. 44,900.00	Rs. 50,000.00	Rs. 54,600.00	Rs. 64,000.00	Rs. 72,800.00
33	Rs. 46,200.00	Rs. 51,500.00	Rs. 56,200.00	Rs. 65,900.00	Rs. 75,000.00
34	Rs. 47,600.00	Rs. 53,000.00	Rs. 57,900.00	Rs. 67,900.00	Rs. 77,300.00
35	Rs. 49,000.00	Rs. 54,600.00	Rs. 59,600.00	Rs. 69,900.00	Rs. 79,600.00
36	Rs. 50,500.00	Rs. 56,200.00	Rs. 61,400.00	Rs. 72,000.00	Rs. 82,000.00
37	Rs. 52,000.00	Rs. 57,900.00	Rs. 63,200.00	Rs. 74,200.00	Rs. 84,500.00
38	Rs. 53,600.00	Rs. 59,600.00	Rs. 65,100.00	Rs. 76,400.00	Rs. 87,000.00
39	Rs. 55,200.00	Rs. 61,400.00	Rs. 67,100.00	Rs. 78,700.00	Rs. 89,600.00
40	Rs. 56,900.00	Rs. 63,200.00	Rs. 69,100.00	Rs. 81,100.00	Rs. 92,300.00

PAY MATRIX TABLE
Pay Band	9300-34800
Grade Pay	4200	4600	4800	5400
Level	6	7	8	9
1	Rs. 35,400.00	Rs. 44,900.00	Rs. 47,600.00	Rs. 53,100.00
2	Rs. 36,500.00	Rs. 46,200.00	Rs. 49,000.00	Rs. 54,700.00
3	Rs. 37,600.00	Rs. 47,600.00	Rs. 50,500.00	Rs. 56,300.00
4	Rs. 38,700.00	Rs. 49,000.00	Rs. 52,000.00	Rs. 58,000.00
5	Rs. 39,900.00	Rs. 50,500.00	Rs. 53,600.00	Rs. 59,700.00
6	Rs. 41,100.00	Rs. 52,000.00	Rs. 55,200.00	Rs. 61,500.00
7	Rs. 42,300.00	Rs. 53,600.00	Rs. 56,900.00	Rs. 63,300.00
8	Rs. 43,600.00	Rs. 55,200.00	Rs. 58,600.00	Rs. 65,200.00
9	Rs. 44,900.00	Rs. 56,900.00	Rs. 60,400.00	Rs. 67,200.00
10	Rs. 46,200.00	Rs. 58,600.00	Rs. 62,200.00	Rs. 69,200.00
11	Rs. 47,600.00	Rs. 60,400.00	Rs. 64,100.00	Rs. 71,300.00
12	Rs. 49,000.00	Rs. 62,200.00	Rs. 66,000.00	Rs. 73,400.00
13	Rs. 50,500.00	Rs. 64,100.00	Rs. 68,000.00	Rs. 75,600.00
14	Rs. 52,000.00	Rs. 66,000.00	Rs. 70,000.00	Rs. 77,900.00
15	Rs. 53,600.00	Rs. 68,000.00	Rs. 72,100.00	Rs. 80,200.00
16	Rs. 55,200.00	Rs. 70,000.00	Rs. 74,300.00	Rs. 82,600.00
17	Rs. 56,900.00	Rs. 72,100.00	Rs. 76,500.00	Rs. 85,100.00
18	Rs. 58,600.00	Rs. 74,300.00	Rs. 78,800.00	Rs. 87,700.00
19	Rs. 60,400.00	Rs. 76,500.00	Rs. 81,200.00	Rs. 90,300.00
20	Rs. 62,200.00	Rs. 78,800.00	Rs. 83,600.00	Rs. 93,003.00
21	Rs. 64,100.00	Rs. 81,200.00	Rs. 86,100.00	Rs. 95,800.00
22	Rs. 66,000.00	Rs. 83,600.00	Rs. 88,700.00	Rs. 98,700.00
23	Rs. 68,000.00	Rs. 86,100.00	Rs. 91,400.00	Rs. 1,01,700.00
24	Rs. 70,000.00	Rs. 88,700.00	Rs. 94,100.00	Rs. 1,04,800.00
25	Rs. 72,100.00	Rs. 91,400.00	Rs. 96,900.00	Rs. 1,07,900.00
26	Rs. 74,300.00	Rs. 94,100.00	Rs. 99,800.00	Rs. 1,11,100.00
27	Rs. 76,500.00	Rs. 96,900.00	Rs. 1,02,800.00	Rs. 1,14,400.00
28	Rs. 78,800.00	Rs. 99,800.00	Rs. 1,05,900.00	Rs. 1,17,800.00
29	Rs. 81,200.00	Rs. 1,02,800.00	Rs. 1,09,100.00	Rs. 1,21,300.00
30	Rs. 83,600.00	Rs. 1,05,900.00	Rs. 1,12,400.00	Rs. 1,24,900.00
31	Rs. 86,100.00	Rs. 1,09,100.00	Rs. 1,15,800.00	Rs. 1,28,600.00
32	Rs. 88,700.00	Rs. 1,12,400.00	Rs. 1,19,300.00	Rs. 1,32,500.00
33	Rs. 91,400.00	Rs. 1,15,800.00	Rs. 1,22,900.00	Rs. 1,36,500.00
34	Rs. 94,100.00	Rs. 1,19,300.00	Rs. 1,26,600.00	Rs. 1,40,600.00
35	Rs. 96,900.00	Rs. 1,22,900.00	Rs. 1,30,400.00	Rs. 1,44,800.00
36	Rs. 99,800.00	Rs. 1,26,600.00	Rs. 1,34,300.00	Rs. 1,49,100.00
37	Rs. 1,02,800.00	Rs. 1,30,400.00	Rs. 1,38,300.00	Rs. 1,53,600.00
38	Rs. 1,05,900.00	Rs. 1,34,300.00	Rs. 1,42,400.00	Rs. 1,58,200.00
39	Rs. 1,09,100.00	Rs. 1,38,300.00	Rs. 1,46,700.00	Rs. 1,62,900.00
40	Rs. 1,12,400.00	Rs. 1,42,400.00	Rs. 1,51,100.00	Rs. 1,67,800.00

PAY MATRIX TABLE
Pay Band	15600-39100
Grade Pay	5400	6600	7600
Level	10	11	12
1	Rs. 56,100.00	Rs. 67,700.00	Rs. 78,800.00
2	Rs. 57,800.00	Rs. 69,700.00	Rs. 81,200.00
3	Rs. 59,500.00	Rs. 71,800.00	Rs. 83,600.00
4	Rs. 61,300.00	Rs. 74,000.00	Rs. 86,100.00
5	Rs. 63,100.00	Rs. 76,200.00	Rs. 88,700.00
6	Rs. 65,000.00	Rs. 78,500.00	Rs. 91,400.00
7	Rs. 67,000.00	Rs. 80,900.00	Rs. 94,100.00
8	Rs. 69,000.00	Rs. 83,300.00	Rs. 96,900.00
9	Rs. 71,100.00	Rs. 85,800.00	Rs. 99,800.00
10	Rs. 73,200.00	Rs. 88,400.00	Rs. 1,02,800.00
11	Rs. 75,400.00	Rs. 91,100.00	Rs. 1,05,900.00
12	Rs. 77,700.00	Rs. 93,800.00	Rs. 1,09,100.00
13	Rs. 80,000.00	Rs. 96,600.00	Rs. 1,12,400.00
14	Rs. 82,400.00	Rs. 99,500.00	Rs. 1,15,800.00
15	Rs. 84,900.00	Rs. 1,02,500.00	Rs. 1,19,300.00
16	Rs. 87,400.00	Rs. 1,05,600.00	Rs. 1,22,900.00
17	Rs. 90,000.00	Rs. 1,08,800.00	Rs. 1,26,600.00
18	Rs. 92,700.00	Rs. 1,12,100.00	Rs. 1,30,400.00
19	Rs. 95,500.00	Rs. 1,15,500.00	Rs. 1,34,300.00
20	Rs. 98,400.00	Rs. 1,19,030.00	Rs. 1,38,300.00
21	Rs. 1,01,400.00	Rs. 1,22,600.00	Rs. 1,42,400.00
22	Rs. 1,04,400.00	Rs. 1,26,300.00	Rs. 1,46,700.00
23	Rs. 1,07,500.00	Rs. 1,30,100.00	Rs. 1,51,100.00
24	Rs. 1,10,700.00	Rs. 1,34,000.00	Rs. 1,55,600.00
25	Rs. 1,14,000.00	Rs. 1,38,000.00	Rs. 1,60,300.00
26	Rs. 1,17,400.00	Rs. 1,42,100.00	Rs. 1,65,100.00
27	Rs. 1,20,900.00	Rs. 1,46,400.00	Rs. 1,70,100.00
28	Rs. 1,24,500.00	Rs. 1,50,800.00	Rs. 1,75,200.00
29	Rs. 1,28,200.00	Rs. 1,55,300.00	Rs. 1,80,500.00
30	Rs. 1,32,000.00	Rs. 1,60,000.00	Rs. 1,85,900.00
31	Rs. 1,36,000.00	Rs. 1,64,800.00	Rs. 1,91,500.00
32	Rs. 1,40,100.00	Rs. 1,69,700.00	Rs. 1,97,200.00
33	Rs. 1,44,300.00	Rs. 1,74,800.00	Rs. 2,03,100.00
34	Rs. 1,48,600.00	Rs. 1,80,000.00	Rs. 2,09,200.00
35	Rs. 1,53,100.00	Rs. 1,85,400.00
36	Rs. 1,57,700.00	Rs. 1,91,000.00
37	Rs. 1,62,100.00	Rs. 1,96,700.00
38	Rs. 1,67,300.00	Rs. 2,02,600.00
39	Rs. 1,72,300.00	Rs. 2,08,700.00
40	Rs. 1,77,500.00

PAY MATRIX TABLE
Pay Band	37400-67000
Grade Pay	8700	9000	10000
Level	13	13A	14
1	Rs. 1,23,100.00	Rs. 1,31,100.00	Rs. 1,44,200.00
2	Rs. 1,26,800.00	Rs. 1,35,000.00	Rs. 1,48,500.00
3	Rs. 1,30,600.00	Rs. 1,39,100.00	Rs. 1,53,000.00
4	Rs. 1,34,500.00	Rs. 1,43,300.00	Rs. 1,57,600.00
5	Rs. 1,38,500.00	Rs. 1,47,600.00	Rs. 1,62,300.00
6	Rs. 1,42,700.00	Rs. 1,52,000.00	Rs. 1,67,200.00
7	Rs. 1,47,000.00	Rs. 1,56,600.00	Rs. 1,72,200.00
8	Rs. 1,51,400.00	Rs. 1,61,300.00	Rs. 1,77,400.00
9	Rs. 1,55,900.00	Rs. 1,66,100.00	Rs. 1,82,700.00
10	Rs. 1,60,600.00	Rs. 1,71,100.00	Rs. 1,88,200.00
11	Rs. 1,65,400.00	Rs. 1,76,200.00	Rs. 1,93,800.00
12	Rs. 1,70,400.00	Rs. 1,81,500.00	Rs. 1,99,600.00
13	Rs. 1,75,500.00	Rs. 1,86,900.00	Rs. 2,05,600.00
14	Rs. 1,80,800.00	Rs. 1,92,500.00	Rs. 2,11,800.00
15	Rs. 1,86,200.00	Rs. 1,98,300.00	Rs. 2,18,200.00
16	Rs. 1,91,800.00	Rs. 2,04,200.00
17	Rs. 1,97,600.00	Rs. 2,10,300.00
18	Rs. 2,03,500.00	Rs. 2,16,600.00
19	Rs. 2,09,600.00
20	Rs. 2,15,900.00

PAY MATRIX TABLE
Pay Band	67000-79000	75500-80000	80,000.00	90,000.00
Grade Pay
Level	15	16	17	18
1	Rs. 1,82,200.00	Rs. 2,05,400.00	Rs. 2,25,000.00	Rs. 2,50,000.00
2	Rs. 1,87,700.00	Rs. 2,11,600.00
3	Rs. 1,93,300.00	Rs. 2,17,900.00
4	Rs. 1,99,100.00	Rs. 2,24,400.00
5	Rs. 2,05,100.00
6	Rs. 2,11,300.00
7	Rs. 2,17,600.00
8	Rs. 2,24,100.00