The Union Cabinet chaired by Prime Minister Narendra Modi met today, October 16, 2024. The Cabinet gave its approval to increase the dearness allowance (DA) and dearness relief (DR) for central government employees and pensioners by 3%. This comes up as a Diwali bonanza for over 1 crore central government employees and pensioners.

Earlier, central government employees receive DA at 50% of their basic salary. The pensioners receive DR at 50% of their basic pension. This hike will raise their DA and DR to 53%. The last hike in DA was of 4%, announced in March 2024, and effective from January 2024. Union Minister Ashwini Vaishnav announced the cabinet decision on Wednesday, in a press conference.

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Let’s take an example of an employee whose basic salary is Rs 22,000. The 3% hike in DA will translate into the hike of Rs 660 per month is his/her salary.

In simple terms, a central government employee with a basic salary of Rs 22,000 was getting 11,000 as DA at 50% rate. This makes his/her monthly pay (Basic + DA) Rs 33,000. After the 3% increase in DA by central government, the employee is entitled to get Rs 11,660 as DA every month. This takes the monthly pay (Basic + DA) of that employee to Rs 33,660.

The same calculation is also applicable in case of pensioners, who are entitled to get Dearness Relief (DR).

Notably, Dearness Allowance (DA) or Dearness Relief is a percentage of the basic salary provided to employees and pensioners. Governments provide DA and DR to help their employees mitigate the effects of inflation on their cost of living. DA is adjusted periodically to reflect changes in the cost of living.