Bonanza for govt employees as Cabinet OKs 4% hike in dearness allowance

Centre hikes DA to 50% of basic pay for its employees

To compensate against price rise, the Union Cabinet, chaired by Prime Minister Narendra Modi, on March 7 approved to release an additional instalment of Dearness Allowance (DA) to Central Government employees and Dearness Relief (DR) to pensioners representing an increase of 4 percent.

The increase, which is applicable from January 1, 2024, will push up DA and dearness relief (DR) to 50 percent.

The allowance will benefit 49.18 lakh employees and 67.95 lakh pensioners, said Union Minister Piyush Goyal during the Cabinet decisions briefing. This increase is in accordance with the accepted formula, which is based on the recommendations of the 7th Central Pay Commission.

The latest hike will cost the exchequer Rs 12,868.72 crore per annum, he added.

The previous hike came ahead of Diwali in October 2023, wherein the government had increased the dearness allowance and dearness relief by 4 percentage points to 46 percent with effect from July 1, 2023 to benefit 48.67 lakh central government employees and 67.95 lakh pensioners. The cumulative financial impact resulting from hike in DR and DA was estimated at Rs 12,857 crore annually.

While the DA functions as a cost-of-living adjustment allowance extended to the government's committed workforce, DR is offered to central government pensioners to help them manage an increase in the cost of living. The government revises the rates on these allowances twice a year.

According to the recommendations of the 7th Pay Commission, once the DA reaches 50 percent, there will be an automatic increase in the house rent allowance (HRA) and other benefits including gratuity, children’s education allowance, transport allowance, pushing up the take-home salary of central government employees.

Goyal confirmed this development during the briefing on Cabinet decisions. "With the hike of 4 percent, since the increase has now gone up to 50 percent, the consequential increase in HRA will be from 9 to 10 percent, from 18 to 20 percent, and from 27 to 30 percent. Similarly, gratuity upper ceiling will increase to 25 lakhs, and all the other benefits that were being received will all go up by 25 percent," he added.