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Liberal increase in DA for central government employees, pensioners-check details

The Financial Express logo The Financial Express 3 days ago FE Bureau
© AP Photo/Channi Anand, File

The Centre on Wednesday pleasantly surprised its 1.15 crore employees and pensioners by hiking their dearness allowance and reliefs (DA/DR) by a steep 5 percentage points to 17%, in a gesture that went beyond the relevant formulaic requirement and patently aimed at boosting festive-season consumption.

Revised twice a year, in January and July, DA in theory is meant to offset the impact of inflation and enable the beneficiaries to cope with the increasing prices. However, the latest DA hike, to be effective from July 1, 2019, is the highest ever and is despite the annual consumer price inflation during the 12 months till the implementation date being just 3%.

This bucks the trend of DA hikes lagging the inflation rate in recent years.

Beginning January 2019, the government had raised the DA/DR to 12% from 9%.

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The government said the combined impact on the exchequer on account of both DA and DR would be Rs 15,909 crore per annum and Rs 10,606 crore in financial year 2019-20 (for a period of eight months from July 2019 to February 2020).

DA is computed as percentage of basic pay and it is now a norm to merge the DA with the basic salary once the percentage breaches the 50% mark. DA is fully taxable. The DA computation formula is revisited by every pay commission and the current formula is based on the 7th Pay commission recommendations.

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"Taking into consideration (other specified) factors and the impact of recent policy rate cuts, the CPI inflation projection is revised slightly upwards to 3.4% for Q22019-20, while projections are retained at 3.5-3.7% for H22019-20 and 3.6% for Q12020-21, with risks evenly balanced," the RBI has said in its latest bi-monthly monetary policy statement.

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