Dearness Allowance DA

What is Dearness Allowance ?

Dearness Allowance is cost of living adjustment allowance which the government pays to the employees of the public sector as well as pensioners of the same. DA component of the salary is applicable to employees in India.

Dearness Allowance can be basically understood as a component of salary which is some fixed percentage of the basic salary, aimed at hedging the impact of inflation.

How to Calculate Dearness Allowance?

After the Second World War, DA component was introduced by the government. After 2006, the formula for calculating dearness allowance has changed and currently DA is calculated as follows,

For Central Government employees:

Dearness Allowance % = ((Average of AICPI (Base Year 2001=100) for the past 12 months -115.76)/115.76)*100

For Central public sector employees:

Dearness Allowance % = ((Average of AICPI (Base Year 2001=100) for the past 3 months -126.33)/126.33)*100

Where, AICPI stands for All-India Consumer Price Index.

From the year 1996, DA has been included to compensate for price rise or inflation in a particular financial year and hence it is revised twice every year, once in January and then in July.