Central Government employees and pensioners to receive 4% hike in DA and DR from January 1

The Union Cabinet on Thursday approved hike in dearness allowance (DA) for central government employees and dearness relief (DR) for pensioners by 4 per cent with effect from January 1.

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With this revision, the DA will reach 50 per cent. This means various other allowances such as Housing Rent Allowances (HRA), Children’s Education and Transport Allowances, and gratuities, will also go up based on the formula suggested by the 7th Pay Commission. All of them will get arrears for January and February and the revised rate for the current month, along with salary and pension for March.

The combined impact on the exchequer, on account of both DA and DR and increase in other allowances, would be around ₹15,000 crore for January and February of FY24, Commerce Minister Piyush Goyal said in a press conference, while announcing the decisions made by the Cabinet. This will benefit about 49.18 lakh central government employees and 67.95 lakh pensioners. Similar hikes are now expected for state government employees too.

As and when the DA and DR reach 50 per cent, it is merged into basic and the next round of DA revision starts from zero. However, Goyal did not confirm whether it will happen this time or not, though he did mention that various other allowances will go up with this latest revision.

Based on the change in Consumer Price Index — Industrial Workers (CPI-IW), DA and DR are revised twice in a year. First revision is normally announced just before Holi and made effective from January 1. Similarly, second revision is decided just before Durga Puja and made effective from July 1. There is another provision which says HRA will be calculated at higher rates once DA reaches 50 per cent.

For the purpose of HRA, entire country divided into three categories — X, Y and Z. The HRA rate for X categories of cities (Delhi, Greater Mumbai, Chennai, Kolkata, Pune, Hyderabad, Bengaluru and Ahmedabad) will now be 30 per cent as against 27 per cent. Similarly, rate for various tier-II cities such as Bhopal, Lucknow, Patna, Varanasi, etc, which falls into the Y category will go up to 20 per cent from the present 18 per cent. Employees in all other locations will get HRA according to the Z category and the rate will be 10 per cent as against 9 per cent.

Based on minimum basic of ₹18,000, new rates of HRA will be ₹5,400, ₹3,600 and ₹1,800 respectively. Earlier, these rates were ₹4,860, ₹3,240 and ₹1,620 respectively. Rise in DA will have an impact on transport allowance as it is paid between ₹900-7200 plus DA. At the same, time, daily allowance given will be increased by 25 per cent while hostel subsidy for children education will also increase by 25 per cent. Retirement gratuity will go up to ₹25 lakh from ₹20 lakh.

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The DA reaching 50 per cent will benefit the Chairpersons and Members of select regulatory bodies. As of now, they get ₹4.50 lakh and ₹4 lakh respectively per month which will go up by 25 per cent.

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