Dearness Allowance Hiked for Central Government Employees

On Wednesday, the Union Cabinet led by Prime Minister Shri. Narendra Modi decided to hike the Dearness Allowance (DA) and Dearness Relief (DR) by 3% for the Central Government employees and pensioners. The hike of 3% on the DA and DR will increase the existing rate from 31% to 34%.

The decision to hike DA and DR will benefit over 1.16 crore Central Government employees and pensioners. It will benefit about 47.68 lakh Central Government employees and around 68.62 lakh pensioners. 

The 3% additional hike will be effective from 1 January 2022. The increase is as per the accepted formula based on the recommendations of the 7th Central Pay Commission. The 3% hike will impact the exchequer by Rs.9,544.50 crore per annum. 

The hike in DA and DR will also apply to civilian employees paid by the defence services. However, the Defence and Railways Ministry will issue separate orders regarding armed forces personnel and railway employees.

The increase of 3% DA will provide relief for the Central Government employees amid the rising prices of diesel, petrol and increasing inflation. In October 2021, the Union Cabinet had hiked the DA and DR by 3% to 31% to be effective from 1 July 2021.

Earlier in July 2021, the government restored the DA and DR and increased the allowance rate from 17% to 28%. The Central Government had frozen three additional instalments of the DA and DR due to the COVID-19 pandemic, which were due on 1 January 2020, 1 July 2020, and 1 January 2021, respectively.

For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@cleartax.in