KEY HIGHLIGHTS
- The DA hike will entail an outflow of Rs 34,400 crore per year for the exchequer.
- With the restoration of DA, central government employees are likely to see a big jump in their take-home salary, PF contribution.
- However, the government has said that the DA revision will be done with effect from July 1, 2021, ‘prospectively’.
New Delhi: In a major relief for 50 lakh central government employees and 61 lakh pensioners, the Union Cabinet headed by Prime Minister Narendra Modi today (July 14) approved the hike in Dearness Allowance (DA) from 17% to 28% with effect from July 1, 2021. The DA hike will entail an outflow of Rs 34,400 crore per year for the exchequer.
Dearness allowance and DR are paid by the government to its employees and pensioners respectively to compensate them for the increase in the cost of living on account of inflation. It is revised twice a year, on January 1 and July 1.
Worth mentioning here is that the Centre had frozen DA and DR of central government employees and pensioners last year keeping in view the fall in government revenue collection and rising spend on social welfare schemes after the outbreak of the Covid-19 pandemic.
As of now three instalments of DA were pending- 4% from January 1, 2020 to June 30 2020, 3% from July 1, 2020 to December 31, 2020, 4% from January 1, 2021 to June 30, 2021.
With the restoration of DA, central government employees will see a big jump in their take-home salary, provident fund contribution and gratuity as well.
To get an idea of how additional amount a central government employee will get after the DA restoration, let us see the following calculation. As we all know that under 7th CPC the minimum Grade Pay of a Level-1 employee is Rs 1800 and his basic salary ranges from Rs 18,000 to Rs 56,900. So at the entry level, an employee having basic pay of Rs 18,000, will see his take-home pay increase by Rs 1,980 (with effect from July 1) before taking into account deduction towards provident fund and taxes.
No arrears to be paid for the period January 1, 2020 to July 1, 2021
However, the government has said that the DA revision will be done with effect from July 1, 2021. “The rate of Dearness Allowance/Dearness Relief for the period 01.01.2020 to 30.06.2021 shall remain at 17%,” the government said in a release.
It means no arrears will be paid for the period January 1, 2020 and June 30, 2021. It means employees and pensioners will lose 4% DA for the period January 1, 2020 to June 30 2020, 7% DA that would have accrued for the period July 1 2020, to December 31, 2021 and 11% DA for another six months between January 1, 2021 to June 30, 2021.
Nonpayment of arrears will be a big loss for the employees and pensioners. For example, the minimum arrear that a Level-1 employee would lose on account of nonpayment of arrears is Rs 23,760(4% of Rs 18,000 for 6 months plus 7% of Rs 18,000 for 6 months plus 11% of Rs 18,000 for 6 months).
