7th Pay Commission: After reaching 50%, will DA merge with basic salary? Know calculation for central government employees

7th Pay Commission: The central government got their Holi gifts from their employer when Centre announced a four per cent hike in dearness allowance (DA) and dearness relief (DR). What sweetened their deal was a hike in House Rent Allowance (HRA) and an increase in the tax exemption limit of gratuity. After a four per cent jump in the DA, it has increased to 50 per cent. Central government employees will get their arrears with effect from January 1. With the DA touching the limit of 50 per cent, next questions are- will it be merged with the basic pay? Will it become zero and be recalculated for the next pay commission? When can the government issue a notification regarding its merger with basic pay? Read this write-up to know more. 

7th Pay Commission: DA calculation to start from zero

The mathematics of the Dearness Allowance (DA) for central government employees is most likely to change in the Year 2024.

Also Read | 7th Pay Commission: Centre increases tax exemption limit on gratuity from Rs 20 lakh, know details

The pay commission rule says that once the DA reaches the limit of 50 per cent, it is merged with the basic salary (pay) and its calculation starts from zero.

But the government is yet to issue any notification for the DA merging with the basic salary.

Also Read | 7th Pay Commission: How much gratuity central government employees get on Rs 15,000 basic salary; know calculations

It may take some more time. But it is yet to be seen if it merges the DA with basic pay and srarts DA calculations from zero for the next pay commission.

Also Read | 7th Pay Commission: Along with 4% DA, Centre also hikes HRA; know city-wise details  

But, if it becomes zero, when can it be?

7th Pay Commission: When can the DA calculation change?

While implementing the 7th Pay Commission in 2016, the government had reduced the DA to zero.

According to the rules, as soon as the DA reaches at 50 per cent, it will be reduced to zero and the money that the employees will be getting as the allowance will be merged with the basic salary.

Also Read | DA Hike Announced: How is dearness allowance calculated for central government employees? 

E.g., suppose the basic salary of an employee is Rs 20000, then they get a 50 per cent DA hike of Rs 10000. In that situation, the increased DA will be merged with the basic salary, and the DA will again be reduced to zero. However, after the DA's merger with the basic salary, the revised basic for the same person will be Rs 30,000.

However, for this, the government may have to make some changes in the fitment also.

7th Pay Commission: Why is DA reduced to zero?

Experts say that, as a rule, 100 per cent DA received by employees should be added to the basic salary, but this may not be possible all the time.

However, it has been merged in the past, most recently in 2016.

Also Read | DA Hike Announced: Central govt employees to get 4% increase in dearness allowance | 7th Pay Commission

In 2006, when the Sixth Pay Commission came, at that time, 187 per cent DA was being given in the Fifth Pay Commission pay scale till December.

The entire DA was merged with the basic pay.

Therefore, the coefficient of the sixth pay scale was 1.87.

Then, a new pay band and grade pay were also created. 
 

7th Pay Commission: Will DA become zero?

According to experts, the new DA will be calculated in July.

Since the government increases DA only twice a year, approval for January 2024 has been given in March.

Now, the next revision can be implemented in July 2024.

In such a situation, the DA can be merged and and it can become zero.

The AICPI index from January to June 2024 will decide whether the DA hike will be 3 per cent, 4 per cent or more.

As soon as this situation is cleared, 50 per cent DA will be added to the basic salary of the employees.
  

7th Pay Commission: Financial burden on government

At the time of the Sixth Pay Commission in 2006, the new pay scale was implemented on January 1, 2006, but its notification was issued on March 24, 2009.

Due to this delay, DA arrears of 39 to 42 months was paid to central government employees in three installments in three financial years- 2008-09, 2009-10 and 2010-11.

A new pay scale was also created.

In the fifth pay scale of Rs 8000-Rs 13500, a 186 per cent DA hike was Rs 14500.

Therefore, after adding both, the total salary became Rs 22, 880.

In the sixth pay scale, its equivalent pay scale was fixed at Rs 15600-Rs 39100 plus Rs 5400 grade.

In the sixth pay scale, this salary was Rs 15600-Rs 5400 plus Rs 21000, and after adding the 16 per cent DA, or Rs 2226, to it on January 1, 2009, the total salary was fixed at Rs 23, 226.

The recommendations of the Fourth Pay Commission were implemented in 1986, the Fifth in 1996, and the Sixth in 2006.

The recommendations of the Seventh Commission came into effect in January 2016.