Last week, the Union Government announced an increase of 4% of the base pay or pension in both the dearness allowance (DA) for Central Government Employees and the dearness relief (DR) for pensioners. The most recent increase will raise the DA/DR rate for Central Government employees and pensioners to 42% of the base pay/pension.
According to the formula suggested by the 7th Pay Commission, the government decides whether to increase the DA/DR rate. To make up for the price increase, DA and DR are given to employees and pensioners, respectively. Almost 47.58 lakh Central Government employees and 69.76 lakh pensioners will benefit from the most recent increase.
The percentage of dearness allowance paid to Central Government employees will now be 42% of the basic wage due to the 4% increase in DA. Hence, if an employee's base income is Rs. 31400, for instance, he would have previously received Rs. 11,932 as DA at the relevant rate of 38%.
An employee would now receive Rs 13,188 in DA as DA increases to 42%. As a result, his salary's deferred compensation component would effectively rise by 10.5%, from Rs. 11,932 to Rs. 13,188. The DA component for this employee would rise by Rs 1256 in total (Rs 13,188-Rs 11,932).
The increase in DA/DR will take effect on January 1, 2023. As a result, the additional installment, which will take effect on January 1, will be 4% more than the current rate of 38% of the basic pay/pension.
When does an employee's Dearness Allowance become part of their base pay?
When DA exceeds the 50% cap, it is combined with the employee's base pay. The employees' salaries increase significantly as a result of this merger. DA is now set at 50% of an employee's base pay.
Should an employee pay taxes on their Dearness Allowance?
According to the most recent tax updates, a paid person who receives a Dearness Allowance must pay tax on it because it is taxable for those receiving a regular wage. Also, as required by the Income Tax Act of 1961, declaring one's tax liability for DA during ITR filing is a must.
