7th Pay Commission: The math behind calculating DA and how much you’ll get this time

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Central government employees across India are waiting for their dearness allowance to be rolled out (DA), which was freezed last year in the view of covid-induced economic disruption. The Finance Ministry is expected to release three pending instalments of DA and dearness relief (DR) from 1 July 2021, a move that would benefit 48 lakh central government employees and 65 lakh pensioners.

DA is paid to the central government employees twice a year and the instalments for 1 January 2020, 1 July 2020, and 1 January 2021 will be restored. The allowance is directly linked to the employee’s cost of living and the consumer price index.

Salary hike Dearness allowance is revised from time to time by the Central government. It is calculated on the basic pay of the employees. Currently, the central government employees are entitled to 17% DA. It came into effect from July 2019 and was revised upward by 4% in January 2020, 3% in June 2020. It was further increased by 4% in January 2021 to 28% of the basic pay. DA is fully taxable.

The new pay scale for government employees in Punjab will come into effect from From April 30, 2021. The revised pay scale is also expected to be implemented in Himachal Pradesh. The move will benefit about 3.25 lakh government employees and more than 3 lakh pensioners in Punjab.

How DA is calculated DA is linked to All India Consumer Price Index (AICPI). For central government employees: DA% = ((Average of AICPI (Base Year 2001=100) for the past 12 months -115.76)/115.76)100.

For central public sector employees: DA% = ((Average of AICPI (Base Year 2001=100) for the past 3 months -126.33)/126.33)100.

For pensioners: Whenever the pay commission revises the salary structure, the DA of retired employees is also revised. So, when the pay commission announced a DA hike, for pensioners also the allowance is increased by the same percentage.