Dearness Allowance Increased to 31% for Central Government Employees

With effect from 1 July 2021, the Dearness Allowance (DA) concerning Central Government employees has been increased to 31% of the basic pay, which was previously 28%. Last week, the Union Cabinet had sanctioned a 3% DA hike concerning Central Government employees and Dearness Relief (DR) for pensioners over the 28% current rate.

As per the Finance Ministry, the word ‘basic pay’ refers to the pay drawn according to the 7th pay commission matrix; it will not include any other type of pay such as special pay, etc. DA will also apply to civilian employees paid via Defence Services. The Defence and Railways Ministry will issue individual orders for armed forces personnel and railway employees. The decision to hike DA will benefit around 68.62 lakh pensioners and 47.14 lakh Central Government employees.

The consolidated impact on the exchequer in the view of DA and DR would be Rs 9,488.70 crore. Following the outbreak of the COVID-19 pandemic, the Central Government froze three extra instalments of DA and DR, which were pending from 1 January 2020, 1 July 2020, and 1 January 2021. The freeze was cleared from 1 July 2021; DA, DR rate was increased by 11% points to 28%.

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

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