The 7th Pay Commission hikes the Dearness Allowance. Find out by how much

Hiked Dearness Allowance for Government employees

Dearness Allowance

The Government pays its employees a Dearness Allowance (DA) besides their basic pay. This allowance helps employees meet the rising inflation and manage their lifestyle expenses. The rate of Dearness Allowance is determined by the Government. It is calculated twice every year, in January and in July.

Recently, the 7th Pay Commission increased the Dearness Allowance rate for Central Government employees. The revised rate would apply from 1st July 2022.

Related- Find out what the 7th Pay Commission is all about

Rate hike in Dearness Allowance 

The rate of Dearness Allowance has been increased by 4%. From 1st July 2022, Central Government employees would get a Dearness Allowance of 38% along with their basic pay.

The move came ahead of the festive season giving a financial breather to Government employees. Now, they can get a higher salary, and that too, retrospectively. The increase in the allowance would benefit about 41.85 lakh Central Government employees.

Rate hike in Dearness Relief

Ex-employees of the Central Government who have been receiving pensions also have a cause for joy. The Dearness Relief that is paid to them has also been hiked by 4%. The effective Dearness Relief now stands at 38% from 1st July 2022. This would benefit 69.76 lakh pensioners.

The impact of the rate hike on the Government

After accounting for the increased Dearness Allowance, the Government expects an annual cost hike of Rs.6591.36 crores. For the financial year 2022-23, where the hike would be effective from 1st July 2022, the Government would bear an additional cost of Rs.4394.24 crores.

After factoring in the hike in Dearness Relief, the Government expects an annual increase in expenses of Rs.6261.20 crores. For the financial year 2022-23, the expected rise in expenses is Rs.4174.12 crores.

If the hikes in Dearness Allowance and Dearness Relief are clubbed together, the increased annual outgo is expected to be Rs.12,852.56 crores, and for the financial year 2022-23, it is Rs.8568.36 crores.

The Government also clarified that Railway employees would also get a hike in their Dearness Allowance rates though the rates have not yet been specified.

Government employees can, thus, claim a higher salary with effect from 1st July 2022. This has brought about a cheer for every Central Government employee whose CTC has increased, allowing them to increase their disposable incomes too. The timing could not have been better as the festive season lies ahead when employees can bring in more fervour to their celebrations. 

However, the Dearness Allowance and Dearness Relief form a part of employees' taxable income and are taxable at their income tax slab rates.

Related - Know the tax-saving components of your CTC

Check out the 4% hike in the Dearness Allowance 

The Government pays its employees a Dearness Allowance (DA) besides their basic pay. This allowance helps employees meet the rising inflation and manage their lifestyle expenses. The rate of Dearness Allowance is determined by the Government. It is calculated twice every year, in January and in July.

Recently, the 7th Pay Commission increased the Dearness Allowance rate for Central Government employees. The revised rate would apply from 1st July 2022.

Related- Find out what the 7th Pay Commission is all about

Rate hike in Dearness Allowance 

The rate of Dearness Allowance has been increased by 4%. From 1st July 2022, Central Government employees would get a Dearness Allowance of 38% along with their basic pay.

The move came ahead of the festive season giving a financial breather to Government employees. Now, they can get a higher salary, and that too, retrospectively. The increase in the allowance would benefit about 41.85 lakh Central Government employees.

Rate hike in Dearness Relief

Ex-employees of the Central Government who have been receiving pensions also have a cause for joy. The Dearness Relief that is paid to them has also been hiked by 4%. The effective Dearness Relief now stands at 38% from 1st July 2022. This would benefit 69.76 lakh pensioners.

The impact of the rate hike on the Government

After accounting for the increased Dearness Allowance, the Government expects an annual cost hike of Rs.6591.36 crores. For the financial year 2022-23, where the hike would be effective from 1st July 2022, the Government would bear an additional cost of Rs.4394.24 crores.

After factoring in the hike in Dearness Relief, the Government expects an annual increase in expenses of Rs.6261.20 crores. For the financial year 2022-23, the expected rise in expenses is Rs.4174.12 crores.

If the hikes in Dearness Allowance and Dearness Relief are clubbed together, the increased annual outgo is expected to be Rs.12,852.56 crores, and for the financial year 2022-23, it is Rs.8568.36 crores.

The Government also clarified that Railway employees would also get a hike in their Dearness Allowance rates though the rates have not yet been specified.

Government employees can, thus, claim a higher salary with effect from 1st July 2022. This has brought about a cheer for every Central Government employee whose CTC has increased, allowing them to increase their disposable incomes too. The timing could not have been better as the festive season lies ahead when employees can bring in more fervour to their celebrations. 

However, the Dearness Allowance and Dearness Relief form a part of employees' taxable income and are taxable at their income tax slab rates.

Related - Know the tax-saving components of your CTC

Check out the 4% hike in the Dearness Allowance 

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