Central government employees and pensioners have received welcome news as the dearness allowance (DA) has been increased by 4%, reaching a milestone of 50%. Similarly, the dearness relief (DR) for pensioners has also seen a 4% rise to the same level. This enhancement in DA and DR, effective from January 1, 2024, will positively impact approximately 49.18 lakh employees and 67.95 lakh pensioners of the central government.
| Basic pay (Rs) | Dearness allowance (Rs) | HRA (Rs) | Salary (Rs) |
|---|---|---|---|
| 45,700 | 21,002 | 8,226 | 74,998 |
| 45,700 | 22,850 | 9,140 | 77,680 |
Impact of the 4% DA Increase
The recent 4% hike in DA not only boosts the dearness allowance but also augments other salary components for central government employees. With DA reaching the 50% threshold, as per the 7th Pay Commission's guidelines, allowances such as House Rent Allowance (HRA), daily allowance, and others are set to rise. This comprehensive increase will significantly enhance the overall salary package of central government employees.
Shri Venkatesh, Managing Partner at SKV Law Offices, explains that an increase in the dearness allowance (DA) to 50% for central government employees triggers a rise in several related allowances. This is due to the linkage of these allowances to the DA; as the DA increases, they follow suit, aiding employees to keep pace with inflation.
Upon the DA reaching the 50% mark, the following allowances are expected to see an uptick:
- House rent allowance
- Children's education allowance
- Special allowance for childcare
- Hostel subsidy
- Travel allowance on transfer, including the transportation of personal effects
- Gratuity ceiling
- Dress allowance
- Mileage allowance for the use of personal transport
- Daily allowance
Upon the dearness allowance (DA) reaching 25%, the house rent allowance (HRA) rates were adjusted to 27%, 18%, and 9% for X, Y, and Z category cities, respectively, as per the 7th Pay Commission's advice. With the DA now at 50%, it's proposed that HRA rates will be revised to 30%, 20%, and 10% for X, Y, and Z category cities, respectively.
Calculating the HRA Increase
For a central government employee earning a basic salary of ₹45,700 and residing in a Y-category city, the HRA was previously ₹8,226. With the DA increase to 50%, the HRA will now be 20% of the basic pay. Therefore, the new HRA will be ₹9,140. This marks an increase of ₹914 in HRA, which is the difference between the new and old HRA amounts (\( ₹9,140 - ₹8,226 \)).
Similarly, other salary components like the special allowance for child care, gratuity ceiling, dress allowance, and daily allowance are set to increase by 25% following the DA reaching 50%, in line with the 7th Central Pay Commission's recommendations.
The recent 4% increase in dearness allowance (DA) to 50% will lead to a corresponding salary increment for central government employees.
It's important to note that the actual impact on salary can vary based on the employee's service, location, and specific rules, as well as individual allowances such as those for child education and care. The figures provided should be seen as a general guide and will differ from one individual to another, depending on their salary components and pay scale.
For central government pensioners, the dearness relief (DR) has also been increased by 4%, bringing it to 50%. To understand the effect on monthly pensions, consider a pensioner with a basic pension of ₹36,100. At a 46% DR, they received ₹16,606. Now, with the DR increased to 50%, the pensioner will receive ₹18,050 as dearness relief each.
