7th Pay Commission: Here’s What You Should Know About DA & DR Hike. Key Points

It is important to note that the three instalments of DA and DR held back from last year will not be paid at the new rate, despite a demand by central government staff.

New Delhi: The much –awaited increase in dearness allowance (DA) and dearness relief (DR) has been approved by the Union cabinet on Wednesday offering relief to 11.4 million central government employees and pensioners in times of inflation and pandemic.

The government has increased the DA to 28 per cent of basic pay from 17 per cent effective prospectively from 1 July.

On Wednesday, Information and broadcasting minister Anurag Thakur said that DA and DR from 1 January 2020 to 31 June 2021 shall remain 17 per cent, signalling that no arrears will be paid for the 18-month period.

In case of a government employee's getting a basic salary of Rs18,000, then the DA is Rs3,060 calculated at 17 per cent rate. However, after the hike of 28 per cent, the dearness allowance will be be calcualted at Rs 5,040 monthly. 

Here are things to know regarding DA, DR hike

Dearness Allowance is a part of the salary that is aimed at combating inflation and revised twice a year -once in January and once in July. It is important to note that the three instalments of DA and DR held back from last year will not be paid at the new rate, despite a demand by central government staff.

Earlier, the three additional instalments of DA to central government employees and DR to pensioners, which were due from 1 January 2020 till June 2021, were frozen in April.

The hike to 21 per cent of basic pay from 17 per cent was held soon after it was approved by the cabinet.

All such hikes, which were due from January 1, 2020, July 1, 2020 and January 1, 2021 were frozen due to the financial impact of coronavirus. The hike was put on hold owing to pandemic which kept the central government finances under pressure.

On Wednesday, the minister stated the decision to defer the three instalments for 18 months saved the Centre Rs37,530 crore. The move went on to build a Rs1.2 trillion corpus to combat the coronavirus pandemic and augment the stimulus spending required to revive the battered economy.

On the other hand, the state governments saved an additional Rs82,566 crore by deferring the payments, according to the Union government’s estimate.

The rate of Dearness Allowance was 17 per cent earlier has now been increased to 28 per cent. The rate of Dearness Allowance/Dearness Relief for the period 01.01.2020 to 30.06.2021 shall remain at 17 per cent.

At present, the government employees are getting a 17% dearness allowance. For example, if a government employee's basic salary is ₹18,000, the DA is ₹3,060. With the hike of 28%, the dearness allowance will be 5,040 in a month. This calculation will be applicable from July 1.

The Cabinet has approved an 11 percentage point DA hike as part of the three pending instalments. “Now, the central government has decided to increase the Dearness Allowance… with effect from July 1, 2021 to 28 per cent, representing an increase of 11 percentage points over existing rate of 17 per cent of the basic pay or pension,” he said. 

The move will benefit about 48.34 lakh central employees and 65.26 lakh pensioners.

The increase will come into effect from July 1, 2021 representing an increase of 11 per cent over the existing rate of 17 per cent of the basic pay/pension.