7th Pay Commission DA Hike Update: Will DA Drop To Zero From July 1 Or Will There Be A Change? Here's All You Want To Know

There has been a lot of confusion around automatic merger of DA and DR once it reaches the 50 percent cap. What is next for government employees? We decode.

New Delhi: There has been a long-standing discussion that at 50 percent the Dearness Allowance (DA) will drop to zero. This was scheduled to happen on July 1, 2024. The basis of this discussion was the previous parlance or practice, since there used to be automatic merger of DA and DR into basic salary as both the allowances reached 50 percent mark.

A Business Line report had also confirmed a few months ago that there was no recommendation under the 7th Pay Commission to merge DA with basic pay at any stage. Business Line further wrote, consequent to the absence of any particular mentioning of auto merging of DA with basic pay, the next installment of DA/DR 'will not start from ‘Zero’ but will continue after 50 say 52 or 53 or 54 percent."

For the central government employees, however, there seems to be no good news. Beginning January 2024, a 50 percent dearness allowance is being provided and it has not been reduced to zero. It seems that the calculations will continue to increase in size without ever coming close to zero.

The discussion on DA dropping to zero was started because of the revision in HRA. The 7th Pay Commission consolidated the dearness allowance. There isn't a rule that says this will still be followed, though. There was a provision that HRA had to be evaluated when DA reached 50 percent. At that moment, it was also indicated that the dearness allowance would be removed. But, there is no official statement on this from the government.

Will the DA be zero or not?

Employees' dearness allowance won't be zero and the DA hike calculation will continue, since there is no rule regarding this. The last time this was done was when the base year was changed. Changing the base year is no longer necessary, as a result of which, central employees' DA will rise at a rate of 50 percent.

DA will increase less this year?

The amount of dearness allowance that employees will receive starting July 2024 is determined by the AICPI-IW index figures between January and June 2024. The figures for January, February, March, April, and May have been received thus far. With the index value of 138.9 points in January, the dearness allowance went up to 50.84 percent. The index had values of 139.2 in February, 138.9 in March, 139.4 in April, and 139.9 in May. According to this trend, the dearness allowance has increased to 51.44 percent in February, 51.95 percent in March, 52.43 percent in April, and 52.91 percent by May.

How much of the DA can be raised?

Experts estimate that the DA can only rise by 3%. If this occurs, the employees' DA will rise to 53 percent. There is no way for zero to exist. The dearness allowance is calculated using the AICPI index. The index's inflation data, gathered from various industries, indicates the rate at which the employees' allowance needs to rise with inflation.

When will DA be announced?

The central government employees receive notice of their DA by September or October. It will, however, only be put into effect from July 2024. Payment for the intervening months will come as arrears. The DA will be determined by AICPI data from January to June 2024 under the 7th Pay Commission.