Explained: How will 4% hike in DA increase take home salary of govt employees?

This adjustment in DA also triggers corresponding increases in other components like house rent allowance (HRA), daily allowance, and gratuity ceiling, as per the recommendations of the 7th Pay Commission.

Team Asianet Newsable

First Published Mar 8, 2024, 3:33 PM IST | Last Updated Mar 8, 2024, 3:41 PM IST

The Union Cabinet had recently announced a significant increase in dearness allowance (DA) for central government employees and dearness relief (DR) for pensioners. The decision, effective from January 1, 2024, involves a 4% hike, bringing the DA and DR to 50%.

This move is expected to impact the take-home salary and various allowances of around 49.18 lakh central government employees and 67.95 lakh central government pensioners.

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The 4% increase in DA has direct implications on the salary structure of central government employees. For instance, if an employee with a basic salary of Rs 45,700 per month had a previous DA of 46%, the dearness allowance was Rs 21,022. With the recent 4% hike, the DA will rise to Rs 22,850, resulting in a salary increase of Rs 1,818.

Moreover, this adjustment in DA also triggers corresponding increases in other components like house rent allowance (HRA), daily allowance, and gratuity ceiling, as per the recommendations of the 7th Pay Commission.

Here is a list of the allowances that will go up when the DA reaches 50%

House Rent Allowance
Children's education allowance
Special allowance for childcare
Hostel subsidy
Transportation allowance on transfer
Gratuity ceiling
Dress allowance
Mileage allowance for own transport
Daily allowance

According to Venkatesh, the Managing Partner of SKV Law Offices, the increase in DA to 50% prompts adjustments in various related allowances such as house rent allowance, children's education allowance, special allowance for childcare, hostel subsidy, transportation allowance on transfer, gratuity ceiling, dress allowance, mileage allowance for own transport, and daily allowance.

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These allowances, intricately linked to the DA, rise proportionately, aiding employees in coping with the rising cost of living.

In line with the recommendations of the 7th Pay Commission, the rates of house rent allowance (HRA) are set to be revised to 30%, 20%, and 10% of basic pay in X, Y, and Z cities, respectively, when the DA reaches 50%.

This adjustment aims to align the allowances with the increased cost of living, providing a substantial boost to the overall salary structure of central government employees.

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