Dearness Allowance : Likely To Increase
The Central government is likely to increase the dearness allowance (DA) for its over one crore employees and pensioners by four percentage points to 42% from the existing 38%.
- DA is a cost of living adjustment that the Government pays to public sector employees and pensioners.
- DA calculated is calculated as a percentage of the basic salary.
- DA for Central Government employees is calculated differently than that of public sector employees.
- Since DA is based on the cost of living, this salary component is not fixed. DA varies from employee to employee based on their presence in the urban, semi-urban, or rural sectors.
- DA is fully taxable for individuals who are salaried employees.
- It is compulsory to declare the tax liability concerning DA when filing an ITR.
- Types of DA:
- Variable Dearness Allowance (VDA):
- VDA applies to Central government employees.
- It undergoes revision every six months based on the changes in the Consumer Price Index (CPI).
- Industrial Dearness Allowance (IDA):
- IDA applies to the Public sector employees of the Central Government.
- IDA is revised every quarter based on the changes in CPI.