The Central Government has announced that, from January 1, 2025, it will increase the Dearness Allowance (DA) for its employees and pensioners by 3%. With this hike, the DA will now rise from 53% to 56% in order to help offset inflation on the salaries and pensions of government personnel.
Understanding Dearness Allowance (DA)
Dearness Allowance is an inflation-adjusted cost of living allowance given to government staff and pensioners who are affected by inflation. It pertains to the All India Consumer Price Index (AICPI), which is re-evaluated two times a year, in January and July. The formula to calculate DA is:
DA (%) = (Average of AICPI (Base Year 2016=100) – 115.76) / 115.76 × 100
Effects on Salaries and Pensions
The increase of DA by 3% will have an immediate effect on the monthly earning of central government employees and pensioners. To illustrate, an employee with a basic pay of ₹18,000 will receive an increase of ₹540 in DA, which will now increase from ₹9,540 (53% of ₹18,000) to ₹10,080 (56% of ₹18,000). An employee with a basic pay of ₹44,900 will get a DA increase of ₹1,347, which will count from ₹23,797 to ₹25,144.
For pensioners, ₹9,000 being the basic pension, then the increase will be for an additional ₹270 monthly. A monthly increase of ₹3,750 will be granted to the pensioner with a basic pension of ₹1,25,000.
Additional Benefits Linked to DA Hike
Apart from the increase in DA, the increase in allowances would be applicable under different heads. HRA will increase, thus giving more money for the expenses of employees. Further increases can be expected in Transport Allowances to defray the expenses of travel. There is expected to be an increase in the Children Education Allowance to help the employees cope with their children’s education expenses. Moreover, a 25% increase in Dress and Nursing Allowances has recently been approved by the Health Ministry for the benefit of the healthcare staff.
Prospective Release of 18-Month DA Arrears
During the COVID-19 pandemic, the DA increase was frozen by the government for 18 months (from January 2020 to June 2021). Arrears were being demanded by the employee unions ever since. Granting this will mean a huge one-time payment to the employees and pensioners.
Anticipation of the 8th Pay Commission
Discussions concerning the establishment of the 8th Pay Commission are underway with the onset of its timing to January 1, 2026. The commission will be concerned with reviewing the salary structure, which has a potential increase of the fitment weighting and minimum wage for central government employees.
State Governments Following Suit
Several state governments, inspired by the lead set by the central government, are now mulling a hike in DA for their employees. For instance, Uttar Pradesh has announced a proposal for a 3% increase in DA, which would be of benefit for around 28 lakh employees as well as pensioners. Madhya Pradesh is likely to purge current DA at 50% and hike it to 53%, thus benefiting 7.5 lakh government employees. Jharkhand has already shared the news that it will hike DA by 3% effective July 1, 2024.
Conclusion
The 3% increase to 56% in Dearness Allowance testifies to the efforts that go into making the government among employees and pensioners. Apart from DA hikes–and likely changes in other allowances–as well as other possible releases of DA arrears, the move will enhance the financial status of millions of government personnel in the country.