Most Awaited DA Hike Announced; Raised from 17% to 28%

The most anticipated hike in dearness allowance (DA) and dearness relief (DR) for Central Government employees has now been announced. The Union Cabinet confirmed the hike in DA and DR components with effect from 1 July 2021.

Anurag Thakur, Minister of Information and Broadcasting, stated that the dearness allowance for Central Government employees and pensioners would rise from 17% to 28%. The DA hike is likely to cost about Rs.34,400 crore for the government annually. 

To recall, the government had proposed a 4% hike in the DA component last year from the prevailing rate of 17%. This would sum up to a 21% DA component for the employees and pensioners. This rate was to take effect from 1 January 2021.

Since the pandemic broke out and harmed the government’s revenue, the DA and DR instalments for the following periods were put on hold.

• 1 January 2020
• 1 July 2020
• 1 January 2021
• 1 July 2021

About 50 lakh Central Government employees and 61 lakh pensioners could not receive the benefit of a higher DA for 1.5 years starting 1 January 2020. They continued to receive the DA instalments at the prevailing rate of 17% over the period.

Illustration on Salary Increase

Say you are a Central Government employee with a basic salary of Rs.25,000. A DA of 17% means you will be getting 17% of Rs.25,000, i.e. Rs.4,250. This is the amount you would have got until now.

Since the DA is increased to 28% now, the DA component you will be earning effective from 1 July 2021 is 28% of Rs.25,000, i.e. Rs.7,000. 

What Else Should You Know About DA Hike?

• Dearness Allowance is a salary component to cushion against inflation and is revised twice a year—January and July.
• A whopping 11% increase in the DA component is made as the DA hike had been frozen for the three cycles.
• The latest DA will be realised starting with this month’s salary.
• The 4% hike that was announced last year has been nullified due to the pandemic.
• Since the DA for the period, 1 January 2020 to 30 June 2020, remains at 17%, no dues will be paid.

We hope that you are looking forward to this month’s salary!

For any clarifications/feedback on the topic, don’t hesitate to get in touch with the writer at apoorva.n@cleartax.in