Hi all, How to calculate dearness allowance? Pls help me. thanks, sankar
29th December 2016 From India, Chennai
$$ What is Dearness Allowance?

-Dearness Allowance is cost of living adjustment allowance which the government pays to the employees of the public sector as well as pensioners of the same. DA component of the salary is applicable to both employees in India and Bangladesh.

-Dearness Allowance can be basically understood as a component of salary which is some fixed percentage of the basic salary, aimed at hedging the impact of inflation. Since, DA is directly related to the cost of living, the DA component is different for different employees based on their location. This means DA is different for employees in the urban sector, semi-urban sector or the rural sector.

-Calculation of Dearness Allowance:

After the Second World War, DA component was introduced by the government. After 2006, the formula for calculating dearness allowance has changed and currently DA is calculated as follows,

## For Central Government employees:

Dearness Allowance % = ((Average of AICPI (Base Year 2001=100) for the past 12 months -115.76)/115.76)*100

##For Central public sector employees:

Dearness Allowance % = ((Average of AICPI (Base Year 2001=100) for the past 3 months -126.33)/126.33)*100

Where, AICPI stands for All-India Consumer Price Index.

- From the year 1996, DA has been included to compensate for price rise or inflation in a particular financial year and hence it is revised twice every year, once in January and then in July.

$$ What is Industrial Dearness Allowance?

Industrial dearness allowance or IDA is the allowance applicable to employees of the public sector enterprises. Recently, the government of the India has increased IDA by 5% for this sector. This decision is set to benefit all board level executives, officers and employees of central PSUs.

IDA for government sector enterprises is revised quarterly based on the movement of the Consumer Price Index (CPI) in order to compensate for the rising inflation in the country.

$$ Variable Dearness Allowance:

VAD or Variable dearness allowance is the allowance that comes as a result of revision every six months for central government employees. The changed new figure that is received as a result of taking into consideration the increase or decrease in the Consumer Price Index, CPI, is termed as Variable dearness allowance. Based on this figure, the DA of employees is revised and rolled out.

There are three components that make up VAD.

-First is the consumer price index,

-second, the base index and

-third is the variable DA amount fixed by the government of India.

The third component remains fixed until the government revises the minimum wages. Same way, base index also remains fixed for a particular period. Only the CPI or Consumer Price Index changes every month and affects the overall value of the variable dearness allowance.
31st December 2016 From India, Delhi
Dear Amit sir
Our company's salary structure does not
contain DA/IDA or VDA component however
Our state existing MW is 6456/- plus 378/- VDA. Now i am in the view of adding DA or
VDA component by revising the salary
structure. Pls clarify since it is pvt. Ltd
company weather DA or VDA or IDA will be
Applicable. Also clarify the calculation for
The same with an exemple if possible?
Regds
Amit Gupta
2nd January 2017 From India, Jaipur
Variable Dearness Allowance (VDA) was introduced in 1991 as a tool to safeguard wages against inflation by linking them to the cost of living index. VDA forms an important component while computing the minimum rates of wages.

If an employer is paying wages to workers which is equal to or higher than minimum wages (including VDA) as fixed by the State Government or provided under the Minimum Wages Act, 1948, then they are not required to pay VDA separately. This has been apparently laid down by the Supreme Court in the case of Airfreight Ltd. vs. State of Karnataka (1999 LLR 1008 (SC).

VAD or Variable dearness allowance is the allowance that comes as a result of revision every six months for central government employees. The changed new figure that is received as a result of taking into consideration the increase or decrease in the Consumer Price Index, CPI, is termed as Variable dearness allowance. Based on this figure, the DA of employees is revised and rolled out.

There are three components that make up VAD. First is the consumer price index, second, the base index and third is the variable DA amount fixed by the government of India. The third component remains fixed until the government revises the minimum wages. Same way, base index also remains fixed for a particular period. Only the CPI or Consumer Price Index changes every month and affects the overall value of the variable dearness allowance.

Variable Dearness Allowances is a part of Dearness allowances. Dearness allowance is generally divided into FDA (fixed dearness allowance) and VDA (variable dearness allowance) and ratio is 70:30.

FDA may vary from one organisation to another but VDA calculated at a rate arrived/agreed. VDA revised twice in a year on 1st April and 1st October. VDA is related to Consumer Price Index (CPI).

We knows that VDA is a part of DA Salary will Included "Basic Salary and Variable Dearness Allowance". whether it is private firm or anything else
2nd January 2017 From India, Delhi
Dear Amit sir I am in private sector footwear company However i am in the process of drafting Salary structure. if basic is say 10K then how much DA will be taken of basic salary. Pls clarify........
2nd January 2017 From India, Jaipur
Practically,at junior level it ranges 10-15% of fixed pay (i.e. of basic salary),at middle level it ranges from 15-30% and at senior level it ranges from 30-50%. or as per your company payroll fixation.
This is the latest trends of payroll structures...
2nd January 2017 From India, Delhi
Sir,
CTC Component is as follow...
1) basic 50% of CTC
2) HRA 40% of Basic
3) bonus 8.33% of basic
4) EPF 24% of basic
5) Rs. 1600 conveyance allowance
6) Rs. 1200 Medical Allowance
7) Rest in other allowance
2nd January 2017 From India, Jaipur
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