Dearness Allowance (DA)

Dearness Allowance (DA) is an allowance paid to employees as a cost of living adjustment to compensate for inflationary pressure on the prices of essential goods and services. It is a component of the employee's salary and is based on the cost of living index (CPI).

The DA is calculated as a percentage of the basic pay of an employee and is revised periodically to reflect changes in the cost of living index. The DA is applicable to both government and private sector employees.

The DA is an important factor in determining the salary of an employee. It is usually revised twice a year, in January and July, based on the changes in the CPI. The DA varies across different industries and is higher in certain sectors such as banking and public sector undertakings.

The DA is subject to income tax and is considered as part of the employee's taxable income. However, the government provides relief to certain categories of employees, such as those in the armed forces and paramilitary forces, by exempting a certain portion of their DA from income tax.

In summary, Dearness Allowance is an allowance paid to employees as a cost of living adjustment to compensate for inflationary pressure on the prices of essential goods and services. It is an important component of an employee's salary and is revised periodically to reflect changes in the cost of living index.