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Dearness allowance calculator

Dearness allowance (da) is the allowance provided by the government to its employees. Dearness allowance calculator or the cost-of-living adjustment allowance is provided to government employees, da public sector employees, and pensioners. It was introduced during World War II. It is a pay protection allowance provided to employees to cope with inflation. It is not a salary increment. It is just an allowance that protects your salary’s value over the years. Anyways, the annual increment for any employee is 3% but DA is provided using dearness allowance calculation so that a person can face expenses in inflation.

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Dearness Allowance

An employee gets confident about his or her salary value if the government provides a Dearness allowance using a dearness allowance calculator which states that their salary is protected no matter what. Because of the subdivision of various Indian states into villages, towns, and cities, the Dearness allowance dearness allowance calculation holds more importance and value. To hedge the inflation cost of living difference and the increasing rate of inflation, dearness allowance becomes all the more significant.

Employers in the government sector get a dearness allowance systematically using the dearness allowance calculator whereas employees in the private sector don’t get it directly. the government takes help from the consumer price index to provide dearness allowance. Now let’s find out the dearness allowance calculation using the dearness allowance calculator to factor all components of a salary. Dearness allowance that is formerly known as ‘Dear Food Allowance ‘started back in the day during World War II is like an additional income stimulus for thousands and lakhs of employees of different sectors and pensioners.

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As the cost of living differs from one state and city to another, the DA is based on the location (urban, semi-urban, or rural) where the employee serves. As job transfer is common for government employees, DA helps to hedge the inflation cost of living. Since the inflation rate goes up and down with time, the DA is raised or revised and is frequently adjusted over a particular period. The revision in DA is announced by the central government of India along with the pay commission. Depending on the salary structure report prepared by the Pay Commission, dearness allowance using dearness allowance calculator is revised for employees. Let’s see now how to calculate dearness allowance.

Calculation of Dearness Allowance

Dearness allowance calculation is based on the percentage of the salary. Let’s try and understand how to calculate dearness allowance with the use of an example.

  • Assume Sakshi’s monthly salary is ₹21,000. And she gets or receives a 2% hike in Dearness allowance. That means a 2% hike of rupees, 21,000 is equal to 420 rupees. She gets a 420 rupees hike in her monthly salary.
  • Assume Sakshi’s monthly salary is rs.21,000. And she gets or receives a 100% hike in Dearness allowance. That means a 100% hike of rupees 21,000 is equal to 42,000 rupees. So Sakshi gets 42,000 rupees in her monthly salary.
  • DA is the component by the government. One might want to know how to calculate dearness allowance calculator using da calculation formula:

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1. For Central Government employees:

Dearness Allowance % = ((Average of AICPI (Base Year 2001=100) for the past 12 months -115.76)/115.76)*100

2. For Central public sector employees after 1/1/2007:

Dearness Allowance % = ((Average of AICPI (Base Year 2001=100) for the past 3 months -126.33)/126.33)*100

Where AICPI stands for All-India Consumer Price Index.

Variable Dearness Allowance

VAD/ variable dearness allowance is the allowance for the central government employees, which is a result of six months revision. The increase or the decrease in the consumer price index determines the Variable dearness allowance for an employee. Variable DMZ allowance consists of three components, namely:

  • The base index.
  • The Consumer price index.
  • Variable Dearness allowance set by the Government of India.

Variable Dearness allowance using dearness allowance calculation set by the government of India is fixed until the government doesn’t change the prices The only component with changes every month is the consumer price index. Consumer price index or CPI is the component that affects the overall value of variable dearness allowance.

Industrial Dearness Allowance

 Industrial dearness allowance or IDA is the allowance that is set for private-sector employees. There is a hike of 5% In the dearness allowance for the employees of this sector. This hike has been determined by the Government of India quite recently. Based on the movement of the CPI Consumer Price index, the Government of India is giving quarterly industrial dearness allowance to the government employees as well. DA allowances are given to the employees of different sectors and pensioners because of inflation.

Pensioner’s Dearness Allowance

Dearness allowance using dearness allowance calculator hike is offered to mainly pensioners and staffers for keeping them safe from inflation and securing their financial status. The taxation ecosystem saw a diverse change in the year 2018 when the new budget brought a lot of advancements and developments. Dearness allowance calculation raised to 7% from 5% to all the employees from central government. This hike was beneficial for almost 61.17 lakh pensioners and staffers. Anytime a new base structure is introduced, the Dearness allowance for pensioners and staffers gets revised. Every time the dearness allowance increases by a predetermined percentage, pensions of retired public sector employees get changed or revised.

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Difference Between Dearness Allowance And House Rent Allowance

Dearness allowance calculator is useful and so is house rent allowance also called (HRA). Listed below are the differences between Dearness Allowance and House Rent Allowance.

S.noDearness AllowanceHouse Rent Allowance  
1.It is an allowance to protect the salary of an employeeIt is also an allowance which gives house accommodation benefits.
2.It is a fully taxable allowanceIt is exempted to some extent.

So, no the dearness allowance and HRA are not the same allowances. The dearness allowance is the protection cost for the cost of inflation that is mandated under the Central Government of India to its public sector employees. On the other hand, HRA is compensation for the rental accommodation required by the public sector employees and private-sector employees. Both are taxable under the tax act 1969s. However, HRA is still eligible for a tax exemption to some extent.

Income Tax And Exemption Limit Chart For Dearness Allowance

One has to declare tax liabilities in the dearness allowance returns file; according to Income Tax Act, 1961. Dearness Allowance using dearness allowance calculation is completely taxable for people who are salaried employees in any sector. Dearness allowance becomes part of the salary wherein it forms a component of the retirement benefit salary when an employer provides rent-free accommodation to the employee. Yes, dearness allowance is absolutely taxable under the head salaries in the hands of the employees. There is no tax exemption against the dearness allowance. It forms a part of the total income from salaries and is taxable at the slab rate.

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Pay Commission in DA Modification

There are different components in the salary of an employee. The pay commission is expected to re-evaluate the salary of public sector employees after they factor or evaluate all the components of the salary. Hence, Dearness Allowance is taken into consideration while rolling out new structures of the salary. Pay commission Revises and changes the multiplication factor. That is the role of pay commission in providing da public sector employees their protected salary value.

FAQs on Dearness allowance

Q1. What is dearness allowance?

A1. Dearness allowance using dearness allowance calculator is the allowance paid to employees of government sector, private sector and pensioners to value their salaries in the time of inflation.

Q2. What is the dearness allowance calculator?

A2. The DA is calculated with the help of the dearness allowance calculator that is based on the All-India Consumer Price Index (AICPI) for the past 12 months.

Q3. How to calculate dearness allowance?

A3. The current rate of Dearness allowance multiplied with your basic salary gives you Dearness allowance. That is how to calculate dearness allowance.

Q4. What is the da calculation formula?

A4. The da calculation formula is based on AICPI Where, AICPI stands for All-India Consumer Price Index for Central Government employees: Dearness Allowance % = ((Average of AICPI (Base Year 2001=100) for the past 12 months -115.76)/115.76) *100. For da public sector employees in Central public sector employees after 1/1/2007: Dearness Allowance % = ((Average of AICPI (Base Year 2001=100) for the past 3 months -126.33)/126.33) *100

Q5. What is the percentage hike in da public sector employees?

A5. Currently, the figure stands at 50% of an employee’s basic salary in da public sector employees.

Q6. Can you use da calculator online?

A6. Yes, we can access da calculator online for free.

Q7. What is the dearness allowance calculator’s purpose?

A7. Dearness allowance calculator’s purpose is pretty simple actually. The current rate of Dearness allowance is multiplied by your basic salary.

Q8. Does Dearness Allowance vary based on the location of employment?

A8. Yes, depending on the location of an employee is working from urban, semi-urban, or rural locations, dearness allowance varies.

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