7th Pay Commission: DA to be announced in July with new formula; 5% likely hike

By Shubham Shukla

7th Pay Commission: A new update has come regarding Dearness Allowance (DA) as it is expected to be increased in July 2022. Looking at the inflation and industrial index, then the dearness allowance is believed to increase by about 5 percent. This will be the first time after the year 2019, when there will be a 5 percent jump in dearness allowance. But the twist is that in July, the formula for calculating DA will also change.

7th Pay Commission: How much will DA increase with the new formula?
The DA of central employees is currently 34% and the change in the next dearness allowance has become the talk of the town. The AICPI Index is continuously jumping. But, a new formula will be applied for the calculation of dearness allowance. Also, there is the confusion that will the dearness allowance really increases that much?

7th Pay Commission: What is dearness allowance for?
Dearness allowance is given to central and state government employees to improve their cost-of-living level. This allowance is a part of the salary structure, so there should be no difference in the standard of living of the employee even after the rise in inflation. DA is given to government employees, public sector employees, and dearness relief to pensioners.

7th Pay Commission: New formula
The Ministry of Labour and Employment has changed the calculation formula regarding Dearness Allowance. The Ministry has changed the base year 2016 for DA Calculation. A new series of Wage Rate Index (WRI-Wage Rate Index) has been released. The Labor Ministry said that the new series of WRI with base year 2016=100 will replace the old series of the base year 1963-65.

7th Pay Commission: How dearness allowance will be decided?
The amount of dearness allowance is worked out by multiplying the current rate of DA of the 7th Pay Commission with the basic pay. The current rate of percentage is 12%, if your basic pay is Rs 56,900 DA (56,900 x12)/100. Percentage of Dearness Allowance = Average of CPI for the last 12 months - 115.76. Now the amount that comes will be divided by 115.76. The score that comes will be multiplied by 100.

7th Pay Commission: Salary Calculation
For salary calculation under the 7th Pay Commission, DA has to be calculated on the basic salary of the employee. Suppose the minimum basic salary of a central employee is Rs 25,000, then his DA calculation will be 34% of 25,000. 34% of Rs 25,000 i.e. total will be Rs 8500. This is an example. Similarly, those with the rest of the salary structure can also calculate it according to their basic salary.

7th Pay Commission: Tax on DA
Dearness Allowance is fully taxable. Under the Income Tax rules in India, separate information about dearness allowance has to be given in the Income Tax Return (ITR). That means, the amount you get in the name of dearness allowance is taxable and tax will have to be paid on it.

7th Pay Commission: Types of DA
There are two types of Dearness Allowance. First Industrial Dearness Allowance and second Variable Dearness Allowance. The Industrial Dearness Allowance is revised every 3 months. This is for the employees working in the public sector of the central government. It is calculated on the basis of the Consumer Price Index (CPI). The Variable Dearness Allowance is revised every 6 months. Variable Dearness Allowance is also calculated on the basis of the CPI.