Dearness Allowance Hiked From 17% To 28% – Free PDF Download

What has happened?

• The Union Cabinet on July 14 approved a hike in Dearness Allowance (DA) and Dearness Relief (DR) given to central government employees from 17% to 28% with effect from July 1, 2021. 
• The move comes as a major relief and financial boost for lakhs of government employees and pensioners, which would enhance their spending ahead of the festive season.

What is Dearness Allowance?

• Dearness Allowance is paid by the government to its employees as well as a pensioner to offset the impact of inflation.
• The effective salary of government employees requires constant enhancement to help them cope up with the increasing prices.

background

• The Dearness Allowance was introduced following the second World War, and was then known as the “Dear Food Allowance”.
• Initially DA was given in response to demand of employees for wage revision, however later it was linked to Consumer Price Index.

Pay commissions

• Since India’s Independence, 7 pay commissions have been set up on a regular basis to review.
• It make recommendations on the work and pay structure of the employees of the Government of India.
• The Commission is given 18 months from date of its constitution to make its recommendations.

• It will impact the- 34 lakh central government employees and 65.26 lakh pensioners.

Savings for the government?

• While the 4% hike would have entailed an additional expense of Rs 27,105.08 crore,
• The freeze on the hike at 17% means that the government will save Rs 37,530 crore for the years 2020-21 and 2021-22 on DA and DR.

Now what?

• “In view of the unprecedented situation which arose due to the COVID-19 pandemic, three additional instalments of dearness allowance to central government employees and dearness relief to pensioners,
• Which were due from January 1, 2020, July 1, 2020 and January 1, 2021 had been frozen,“
• Said Anurag Thakur, Minister of Information and  Broadcasting and Minister of Sports and Youth Affairs while addressing the Cabinet’s decision.
• Now, the government has decided to increase the dearness allowance to central government employees and dearness relief to pensioners with effect from July 1, 2021 to 28%,
• Representing an increase of 11% over the existing rate of 17% of the basic pay/pension, Thakur added.
• The decision is expected to cost the government Rs. 34, 401 crore.

Q) Income tax is the most important source of revenue in India. Income tax is?

1. Direct and proportional
2. Indirect and proportional
3. Direct and progressive
4. Indirect and progressive

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