Understanding Dearness Allowance: Does It Change Based on Your City or Salary?

Hi Friends,

Can anybody tell me how to calculate Dearness Allowance? Is there a fixed percentage of salary, or does it vary from city to city?

Hi,

Dearness Allowance is fixed at 40% of the basic salary for metro cities, while for other cities, it varies.

Regards,
Nilesh

Hi,

According to me, DA is given at 75% for metros and 50% within the state. This is what my company is following, and the employees are entitled to DA according to their grades.

Hi,

You must understand the basic concept of dearness allowance. It is a payment towards the rise in the cost of living, which is calculated based on the cost of living index.

As regards the minimum wages, the state government or the central government makes a notification, and payment is to be made. With regard to payment at a higher level, the company can formulate its scheme for the payment of dearness allowance. It can be a fixed percentage of the basic pay or on a sliding scale, as per the company's scheme and policy.

Please remember, once the company is paying more than the minimum wages, it can formulate its scheme for the payment of dearness allowance. Needless to say, all other factors like region, industry, capacity to pay, etc., are taken into consideration by the company.

Cyril

Akanksha,

There is a difference between government and public sector undertakings paying DA and private or limited companies paying DA. DA (DEARNESS ALLOWANCE) is the allowance paid to employees due to a rise in market prices. Generally, DA is calculated as the rise in the consumer price index, and it is connected with the basic pay, usually as a percentage of the basic pay.

Suppose we take a base CPI as 2460. The current CPI is 3460, then the rise would be 1000. Calculating the percentage rise: 1000/2460*100 = 40.65%. Therefore, DA will be 40.65% of the Basic.

SUDIPTA

Hello and hi, dear all fellow comrades,

I would like to request everyone's esteemed assistance in understanding the standard calculation of Basic and DA, regardless of any wage bill.

Take care,
Sarfaraj

Hi,

Basic pay is fixed according to the industry and category. Dearness allowance is actually variable but it is revised once in a year. It is provided to employees to help them manage and live within the budget for the forthcoming year.

Regards,
Senthil

Working in a profit-making company, how do you calculate a 50% IDA merger into basic pay, and what are the benefits of this merger?

In a profit-making organization, integrating a 50% IDA increase into the basic pay can be a complex but rewarding process. This merger can lead to several advantages for employees, such as increased take-home pay, improved job satisfaction, and enhanced financial security. By accurately calculating and implementing this merger, both the company and its employees can benefit from a more competitive compensation structure and a motivated workforce.

Hi Gurpreet,

I'm still unclear about DA. If possible, could you please provide me with some good examples? Currently, I am aware that private organizations are not including a component of the salary.

Thanks!

Best regards,
Gurpreet

Dear Friends,

We have workers on the payroll who have been working for more than 12 years in our machine shop. They are presently demanding Dearness Allowance (DA) to be included. Currently, we are paying Basic HRA, CCA, Conveyance Allowance, etc., which does not include DA as a specific component. Can anybody guide me on whether I should agree to the team that DA will be added to their salary component? If yes, what are the consequences on the Cost to Company (CTC)? If we choose not to provide DA, what response should be given?

Your prompt assistance will help in resolving this matter quickly.

Regards,
Amar

Dear all,

I have gone through all the posts given by friends, but most of us do not have an idea of DA or VDA. Basically, in the private sector, we call it VDA, and in the government sector, it is called DA. VDA is basically variable and is not at all percentage-based, as mentioned by a few friends. It is calculated based on the All India Consumer Price Index.

Now, I will explain with an example from Uttar Pradesh because it varies from state to state. In U.P., we check and change VDA twice a year, i.e., in October and April.

Example of U.P.

U.P. government, with their notification dated 24th Feb 2006, fixed the basic of all categories of workers on an average price index of 522, and these rates were as given below:
- Unskilled: Rs 2600
- Semiskilled: Rs 2964
- Skilled: Rs 3290

Mind it, it was basic and no VDA at that time. Now, VDA will change every year in the months of October and April.

In October 2008, the rates of minimum wages were as given below:

- Unskilled: Basic 2600, VDA 562.83, Total 3163
- Semiskilled: Basic 2964, VDA 641.63, Total 3606 (rounded figure)
- Skilled: Basic 3290, VDA 712, Total 4202

Now, VDA has to increase w.e.f. 01 April 2009. For that, we have to find out the average All India Consumer Price Index from January 2008 to June 2008.

ALL INDIA CONSUMER PRICE INDEX
- Jan 2008: 662
- Feb 2008: 671
- Mar 2008: 676
- Apr 2008: 685
- May 2008: 685
- Jun 2008: 681
- Total: 4060

Now, we have to divide 4060 by 6 to get an average, which comes to 676.67 (rounded to 677). Now we can calculate VDA w.e.f. 01 April 2009.

- Unskilled: (677-522)*2600 / 522 = 772.03
Now, minimum wages for unskilled is 2600 + 772.03 = 3373

- Semiskilled: (677-522)*2964 / 522 = 880.11
Now, minimum wages for semiskilled is 2964 + 880.11 = 3845

- Skilled: (677-522)*3290 / 522 = 976.92
Now, wages for skilled are 3290 + 976.92 = 4267

This is how we calculate VDA.

Thanks,
J.S. Malik

Hi,

I didn't clearly understand the calculation formula for DA. Could you please explain the formula in an easier way for me to comprehend? Thank you.

Dear Sudipta,

I am not able to understand the DA calculation. Can you please explain it briefly with step-by-step calculations?

Regards,
Rajendra

Hi,

Can anyone help me get an Excel formula for calculating DA according to the latest trends?

Thanks

Hi Vishal Harjani,

I want to know the procedure for calculating DA in industries. Kindly provide me with the format including percentages. Could you please clarify this by providing an example?

Regards,

Vishal Harjani

Dear Friends,

I want to know the exact method of calculating the DA. I have gone through the pay commission, still, I need better clarity.

Regards,

Dear All,

As per the act, coverage will be for 20 or more employees for PF contribution. Presently, if the strength is below 20, it is not required to apply for PF contribution.

Thanks,
Raj Narayanan

Hey,

Just find the attachment here... may be of some use to you.

Regards,
Priyanka :)

Friends,

Can you please explain the terms Variable DA, COLI (Cost of Living Index), and neutralization point used in the calculation of monthly DA for the workmen who are hourly rated in my present company? Please help me develop a manageable knowledge to cope with the setup of this company.

Best Regards,
SANTANU BISWAS

Hi,

I am still a little bit confused. Will you please clearly explain the DA calculation?

DA is actually a variable component that will be revised every financial year. However, I have data on the CPI for each individual month. I have a doubt here - do we need to take the average CPI for all 12 months? If so, then the percentage change in CPI over two successive years is nothing but inflation.

I am totally confused. Please clarify this for me.

My email is snrajuu@gmail.com.

Regards,
S.N.Raju.U.

Considering the living cost and all, wage revision is being done once in five years or ten years. However, inflation will go up day by day, and subsequently, the money value will decrease. To compensate for this, we have to wait until the next wage revision, which is not practical. That is why the Dearness Allowance (DA) is introduced.

The devaluation of money can be assessed through the Wholesale Price Index, All India Consumer Price Index, etc. The difference between these two is that the price variation of all commodities is taken into account for the Wholesale Price Index.

However, for the All India Consumer Price Index, there are some differences/limitations:

1. There is a particular consumer, namely the Industrial Worker.
2. Some specified goods and services are defined, called the "basket of goods."
3. Along with the price variation of commodities, the consumable quantity will also be considered.
4. All over India, 78 centers are selected to take an average.

Based on the All India Consumer Price Index, Industrial DA is being paid, variable in quarters commencing from January, April, July, and October. For example, for January, the AICPI will be the average of the previous September, October, and November. Similarly, for April, it will be December, January, and February; for July, it will be March, April, and May; and for October, it will be June, July, and August, respectively.

When the money devaluation is fully compensated, it is called full DA neutralization. The formula for full DA neutralization = (Total points - Base points)/Base points (in percentage). The AICPI was introduced in India in 1960 and revised in 1982 and 2001. By multiplying the AICPI of 2001 by 4.63, we get the AICPI of 1982, and multiplying the AICPI of 1982 by 4.93, we get the AICPI of 1960. For DA calculation, the AICPI of 1960 is accepted as the base.

In India, mainly two terms of wage settlements exist; the Wage Settlements of 1.1.1997 and 1.1.2007. The base point in 1.1.1997 is 1708, and in 1.1.2007 is 2884.

An example calculation of AICPI for July '10 is as follows: This is equivalent to the average of the previous March, April, and May; which is recorded as 170, 170, and 172 (Base year 2001). Multiply by 4.63 and round, we get 787, 787, and 796 (Base year 1982). Multiply by 4.93 and round, we get 3880, 3880, and 3924 (Base year 1960). Find the average of these 3 and round, we get 3895.

DA for 1.1.1997 scale: Total points - 3895, Base points - 1708, Total - Base = 2187. The percentage is 2187/1708 x 100 = 128.0 (Correct to one decimal).

DA for 1.1.2007 scale: Total points - 3895, Base points - 2884, Total - Base = 1011. The percentage is 1011/2884 x 100 = 35.1 (Correct to one decimal).

I shall insert an Excel sheet for IDA calculation effective 1.10.2008. You may extend the rows further as necessary and just enter the 3 indexes towards the year 2001 in green color columns. The results will appear in yellow, and red is used for static information.

With regards,

ABBAS.P.S,
Secretary,
ITI Employees' Association,
ITI Limited, PALAKKAD - 678 623,
KERALA, INDIA.
+91 9447 467 667

AICPI (base 2001) can be obtained from the following site: [Labour Bureau Main Page](http://labourbureau.nic.in)

Dear Senior,

Still, DA is not very clear to me. Please tell me how to calculate DA and HRA. Could you provide me with a proper suggestion along with one suitable example?

Thank you.

My Dear Seniors,

If salary is fixed at Rs. 12,500 in a hospital, how do we calculate basic salary, DA, HRA, EPF, TA, and any other allowances? Please provide me with the details.

Hello all,

Can DA percentages be different for state employees? If a company wants to maintain the DA at 15%, is it allowed to do so?

Calculation of Dearness Allowance

Can anyone calculate DA for the below-given example?

For instance: The basic is 160. How much do we have to pay for DA? The employees shall be paid dearness allowance in addition to the minimum basic rate of wages specified above. For the calculation of dearness allowance, the base shall be taken as 176 (base 2001 = 100), being the average of All India Consumer Price Index Number for the year 2010. For a further rise of one point above 176 points, an increase of 90 paise (ninety paise only) shall be paid per day.