What is the full form of DA?

Introduction: Definition of Dearness Allowance

Dearness Allowance (DA) is provided by the government to its staff members as well as a retiree to mitigate the impact of inflation. To help them deal with the rising costs, government employees' effective salaries must constantly be increased.

The government has taken numerous steps to reduce inflation, but only limited effectiveness has been seen because prices still fluctuate based on the market. The dearness allowance is determined in accordance with the place of employment of the employee because the impact of prices differs. As a result, depending on whether a person works in the urban, semi-urban, or rural sector, their DA fluctuates.

Industrial Dearness Allowance and Variable Dearness Allowance are the two distinct kinds of dearness allowance. Employees in the industrial sector receive Industrial Dearness Allowance, while those working in agriculture receive Variable Dearness Allowance.

The variables used to calculate IDA and VDA are different, and they are changed at various periods. VDA is changed every six months, whereas IDA is adjusted once every three months.

Purpose of Dearness Allowance

The Dearness Allowance is an additional payment made by the government to those in the public sector and pensioners. By providing a sum over and beyond their base pay, it is intended to help people manage the rising cost of living brought on by price increases. Typically, this is a set portion of the initial salary that is frequently changed to reflect the current situation. Since it is linked to the cost of living in each employee's area, the amount of DA offered changes from one employee to the next based on location.

A vital part of an employee's salary is the Dearness Allowance, and any changes to the DA have a big effect on the workers. Employees' take-home pay rises as a result of an increase in DA, which raises their standard of living.

On the other side, any delay or decrease in the DA causes employee unhappiness, which can lead to labor unrest. The government must therefore make sure that the DA is given to employees on schedule and is consistent with the rate of inflation.

A new structure is created for retired workers who work for the public sector anytime a new structure is produced for a new term wage through pay commission. The dearness allowance operates in a similar manner; anytime there is a rise in the percentage shown in the dearness allowance, the retired employee's pension plan reflects the same increase. Both regular pension members and family pension members will be affected by this change.

Calculation of Dearness allowance

A predetermined percentage of the Basic Salary is used in its calculation. It is directly connected to where the employee is.

India's consumer price index is available for the urban, semi-urban, and rural areas. Therefore, DA will vary depending on whatever sector an individual works in. The formula used to determine DA is as follows −

For the Staff of the Central Government

DA% is calculated as follows: [(Average of AICPI (Base year 2001 = 100) for the previous 12 months - 115.76] / 115.76] x 100

For those working in the public sector

The DA% is calculated as follows: [(Average of AICPI(Base year 2001 = 100) for the preceding 12 months - 126.33) / 126.33] x 100

Importance of Dearness Allowance

The Dearness Allowance is a significant portion of an employee's pay, particularly for those who qualify as non-executives, workers, or industrial employees. Employees receive the allowance in order to preserve their ability to buy parity and to modify their salary to reflect the rising cost of living.

The DA raises employees' morale and helps to raise their level of living. It is a crucial issue that workers take into account when considering whether to accept a job offer or stay on at their current company.


Dearness allowances play a significant role in employee salaries. Employees receive the allowance in order to offset the effects of inflation on their pay and keep their cost of living in balance. The All India Consumer Price Index or AICPI, which is revised twice a year, serves as the basis for calculating DA. Due to the fact that it boosts economic growth and improves employees' disposable income, DA has a substantial effect on the Indian economy. The government must, however, strike an agreement between giving workers enough DA and keeping prices under control.


Q1. Are salary workers subject to taxation on their dearness allowance?

Ans. All salaried employees are liable for taxation on their dearness allowance, according to the assessment. However, when workers have a free-of-charge apartment that satisfies all the requirements and is unfurnished.

Q2. What is the effect of Dearness Allowance on the economy?

Ans. Dearness Allowance has an effect on the economy by raising workers' disposable income, which in turn increases spending by customers, raising demand for products and services, generating job possibilities, and fostering economic growth.

Q3. What happens if the payment of Dearness Allowance is delayed?

Ans. Delays in the payment of Dearness Allowance may cause employee discontent and even workplace instability.

Updated on: 17-May-2023


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