The new figure that is received post change, as a result of factoring in the rise or decline in the Consumer Price Index or CPI, is known as Variable dearness allowance. On the basis of this figure, the Dearness allowance of the employees is revised and then rolled out.
The third component is always fixed until the government revises minimum wages for employees. Similarly, the base index remains fixed for a stipulated period of time. This ends up affecting the overall value of the variable dearness allowance. Since , dearness allowance offered to employees from the public sector has been continuously on the rise. This has happened over a number of years during which the DA percentage rose steadily in order to hedge the rising inflation.
This is supposed to be a great salary booster for employees since all other components of the salary are calculated as a percentage of the basic salary. Demands for merging the DA with the basic salary have been with the government for quite some time. The union cabinet is expected to take a decision on this matter soon. In the meantime, employees from the public sector are ecstatic with anticipation of a merged DA which would mean a major hike in their salaries.
It was quite a relief to most central government employees when the hike in the Dearness Allowance was announced. This move was spearheaded by Indian Prime Minister, Mr. Narendra Modi, and is aimed at benefiting almost 50 lakh Central Government employees and around 55 lakh pensioners. In an effort to reduce the inflation effects on the salaries of these employees, dearness allowance hike is generally offered to pensioners and staffers.
The new budget brought a number of new advancements and developments. As per the proposed changes, this increase in DA in all probability, will work in the favour of more than In India, every subsequent pay commission is expected to re-evaluate the salary of public sector employees, post factoring in the different components of salary. Dearness Allowance is also taken into consideration when the next pay commission report is rolled out.
Pay commissions account for all the factors that are a part of the calculation of salaries of personnel in the public sector. Revision and changing the multiplication factor, too, falls under the purview of the pay commissions. The pension for retired employees of the public sector is revised, each time a new salary structure is proposed by a pay commission.
So is the case with Dearness Allowance. Every instance when DA is increased by a predetermined percentage, the change is reflected in the pensions of retired public sector employees.
This is applicable for both regular pension as well as family pension. Dearness allowance is calculated as a specific percentage of the basic salary which is then added to the basic salary along with other components like HRA House Rent Allowance to make up the total salary of an employee of the government sector. On the other hand, HRA or House Rent Allowance is the salary component given by an employer to an employee in order to meet expenses related to the renting of accommodation which the employee takes for residential purposes.
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Several other components are then calculated added in respect to the basic salary and are then added to it to calculate the take-home amount. One such important component is Dearness Allowance or DA.
Dearness Allowance is paid by the government to its employees as well as a pensioner to offset the impact of inflation. The effective salary of government employees requires constant enhancement to help them cope up with the increasing prices. Despite several measures by the government to control the rate of inflation, only partial success has been achieved because the prices move according to the market.
It, therefore, becomes essential for the government to shield its employees from the adverse effects of inflation. As the impact of inflation varies according to the location of the employee, dearness allowance is calculated accordingly. Thus, DA varies from employee to employee based on their presence in the urban, semi-urban or rural sector.
As DA is provided to employees to protect against the price rise in a particular financial year, it is calculated twice every year — in January and July. The formula to calculate the dearness allowance was changed in by the Government.
As per the latest updates, DA is fully taxable for salaried employees. If the employee has been provided with an unfurnished rent-free accommodation, it becomes that part of the salary up to which it forms the retirement benefit salary of the employee, provided that all other pre-conditions are met. The Income Tax rules in India require the dearness allowance component to be mentioned separately in the returns that have been filed. The Industrial Dearness Allowance for public sector employees undergoes quarterly revision depending on the Consumer Price Index to help offset the impact of rising levels of inflation.
It is revised every six months according to the Consumer Price Index to help offset the impact of rising levels of inflation.
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