This is a new announcement by the Modi-led cabinet which allows a rise in the Dearness Allowance (DA) for Central government employees and pensioners from 53 percent to 55 percent of basic pay and pension from the first of January 2025, earmarking the many for it: about 1.15 crore, which includes an estimated 48.66 lakh employees and 66.55 lakh pensioners.
Financial Implications
This will put an estimated total burden of ₹6,614.04 crores on the government exchequer yearly due to the increase in the DA and DR. It will help the government servants and pensioners to an extent in coping with the increasing prices affecting their cost of living.
How DA is Calculated?
DA is essentially cost-of-living adjustment allowances which the government has granted to its employees and pensioners to rebalance the adverse effects of inflation on their incomes. It is a percentage figure applicable on the employee’s basic salary and it is fully taxable.
Effect on Salary and Pension
The 2 percent increase in DA would directly improve gross earnings for employees and pensions of beneficiaries. For instance, an employee drawing a basic pay of ₹27,000 will now have their DA of ₹540 added to this taking their total DA to ₹14,850 per month; thus, this will result in an extra DA of ₹6,480 over a year. The same transfer will also be done for pensioners.
Payment of Arrears
Hence, it entitles the employees and pensioners to a payment of arrears for three months, that is January, February, and March, and payments are expected along with the salary and pension of April.
Future Outlook
In all probability, the next revision will happen around Diwali, i.e., in October 2025. Assuming the existing trend of inflation and the All India Consumer Price Index for Industrial Workers (AICPI-IW), some forecasts even say that the increase may be in the region of 3 to 4 percent. However, should there be a cooling off in consumer inflation in the coming months, it would be possible that the revision shall see subdued increase.
So do keep watching the notifications for further information about the arrears payment calendar and further changes in DA coming in because another increase of 2 percent isn’t a small matter; rather, it shows the government’s intention and concern to look after its employees and pensioners with respect to increasing costs of living.
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