On Thursday, the Union Cabinet, led by Prime Minister Narendra Modi, sanctioned an extra installment of Dearness Allowance (DA) for Central Government employees and Dearness Relief (DR) for pensioners. This new rate, effective from January 1, 2024, marks a 4% increase over the existing rate of 46% of the Basic Pay/Pension. The rise in DA and DR serves as compensation for the price hike.
Dearness Allowance (DA) is a compensation given to employees as a percentage of their basic salary, aiming to counteract the effects of inflation on their living expenses. It’s regularly updated, usually every six months, to reflect changes in the cost of living index.
The government mentioned that the increase will incur an annual expense of ₹12,868.72 crore to the state treasury, benefiting 49.18 lakh Central Government employees and 67.95 lakh pensioners nationwide.
The total impact on the treasury due to Dearness Allowance and Dearness Relief will be ₹12,868.72 crore annually. This will positively affect approximately 49.18 lakh Central Government employees and 67.95 lakh pensioners. The raise aligns with the formula endorsed by the 7th Central Pay Commission,” stated the Cabinet’s press release.
Dearness Allowance has reached 50%
With the current Dearness Allowance at 50%, both house rent allowance (HRA) and the upper limit for gratuity will see an increase. The new gratuity limit is now ₹25 lakh, up from the previous ₹20 lakh.
In October 2023, the Dearness Allowance was raised by 4% from 42% to 46%. The government stated that these increases align with the recommendations of the 7th Central Pay Commission. This latest Dearness Allowance hike holds significance as it precedes the 2024 Lok Sabha elections, and the Model Code of Conduct (MCC) could be implemented soon.
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