Understanding DA Percentage: Does It Vary Across Different Sectors?

Hi everybody,

I want to know the calculation of DA %. I know that the DA is calculated on Basic Pay, but how much % should we take to calculate DA? Everybody says that it is calculated on Basic Pay, but nobody explains the %. Will it differ from sector to sector? I mean to say that the calculation of DA will be different for Central Government, State Government, Public Limited companies, and Private Limited Companies. Please, somebody help me in this matter.

Bye,
S.K. Durga :)

Hi Pooja,

DA is calculated as follows: DA = Basic/2. Suppose the Basic is 3000, then the DA is 1500. Hope now it is clear to you.

Cheers, Sowmya

This is absolutely wrong.

DA has a complex calculation. You receive the DA from the Labor Office every month, which varies with the type of industry. However, I do not have much idea about how it is calculated. There are certain parameters like the cost of living index, etc., taken into account for the calculation.

Correct me if I'm wrong.

Somaladurga,

I totally agree with ash_achu. DA is calculated and decided by Government Authorities and revised every six months. DA remains constant for each type of workman (i.e., skilled, unskilled, and semi-skilled) and varies by industry.

You will receive a notification of the revision from the Labour Commissioner's office. You can also find it in the Current Labour Report or APS (Labour Digest).

Regards,
Ashutosh Chaturvedi

Dearness Allowance (DA) is a compensatory payment to the employees for the erosion in the real value of their salaries, resulting from price increase. It is necessary for even software companies to show DA as a component of the salaries they pay to their employees, just because the Government of India, in all its wisdom, has included this component in their definition of "salaries." So, for the calculation of PF contributions, Bonus, Gratuity, and other benefits, Basic Salary + DA is considered.

Most companies have "merged" Basic and DA, and show it as a consolidated amount (Basic + Fixed DA). However, most public sector companies, as well as government organizations & departments, use the following method for the calculation of DA.

DA is calculated with reference to the percentage increase in the 12 monthly average of All India Consumer Price Index (AICPI) (base 1960) over the average index of 608, which is the base for the existing scales of pay for Central govt. Employees. This percentage increase is taken in whole numbers only.

Thus, the formula for calculating DA is:

(12 Monthly Average - 608 of AICPI) / 608 x 100 = The % increase in prices.

The % increase in prices is factored with basic salary, and you arrive at the amount of DA figure.

For example, if the % increase is 12%, and basic salary is Rs. 10,000.00, the DA would be Rs. 1,200.00. The present index being considered is, I think, 2000.

Regards,

Achu

In a way, what Ms. Sowmya stated is right, i.e., DA = 50% of Basic but it's termed as DP (Dearness Pay).

In Central Govt Companies:
Effective from 1-7-07, DA is 41%. This DA gets revised twice in a year for Workmen, etc. It's Variable DA, which is decided by the Govt Officials.

Regards,
Achu

Usually, the central government's structure will be similar to the following:

Basic + DP + FDA

DP = 50% of Basic

DA = 41%, which is fixed by the government.

But I'm not sure about the calculation of VDA.

Regards,

Achu

Dear Member,

The DA calculation for the different types of industries is fixed by the Government via its notification. There are two types of DA calculation. One is FDA (FIXED) and the other one is VDA. Fixed Dearness will remain the same; changes are made by the government/company policy. Whereas VDA is calculated based on the Consumer Price Index, which is announced by the Statistical Department every month. There are two kinds of Price Index Numbers: one is the All India Price Index Number, and the other is the State Price Index Number. The State Consumer Price Index Number varies for every metro district according to the cost of living. At the staff and other levels, the declaration of DA is the policy matter of the employer. The percentage and fixation of DA are purely the employer's choice.

Murugavel.B Chennai.

Wage Revision and DA Calculation

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

The devaluation of money can be assessed through the Wholesale Price Index and the All India Consumer Price Index. The difference between these two is that the price variation of all commodities is taken into account for the Wholesale Price Index. In contrast, the All India Consumer Price Index is based on a particular consumer, namely the Industrial Worker, and even on some specified commodities and services called the "Basket of Goods."

Based on the All India Consumer Price, Industrial DA is paid; it varies in quarters commencing from January, April, July, and October. 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. AICPI of 2001 x 4.63 gives AICPI of 1982, and AICPI of 1982 x 4.93 gives AICPI of 1960. For DA calculation, AICPI of 1960 is accepted as the base.

Now in India, mainly two terms of wage settlements are in existence: 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.

I shall quote one example, i.e., calculation of AICPI for July '10. 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 three and round, we get 3895.

DA for 1.1.97 scale: Total points - 3895, Base points - 1708, Total - Base = 2187. % 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. % is 1011/2884 x 100 = 35.1 (Correct to one decimal).

I shall insert an Excel sheet for IDA calculation w.e.f 1.10.2008. You may extend the rows further (as necessary) and just enter the three 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.

[Phone Number Removed For Privacy Reasons]

AICPI (base 2010 can be found on the following site: http://labourbureau.nic.in/indexes.htm)

Hi,

Actually, DA is calculated according to the company policy. Basically, the company has to give 100% of the gross salary, so some companies adopt a structure where the basic salary is 60%, DA is 20%, and other allowances make up the remaining 20%. On the other hand, some companies structure it with the basic salary as 50%, DA as 25%, and other allowances as 25%. However, first, you need to confirm your company's policy. After that, you can consider your options.

Regards,
Pooja Verma

Dear Mr. Mohamed Sardhar,

I was unable to open the link that you had posted. I tried many times. I would be really grateful if you could email the files to me at simplyshivani@gmail.com.

Thanks & Regards,
Shivani Dubey

Dear Mr. Mohamed Sardhar,

I was unable to open the link that you had posted. I tried many times. I would be really grateful if you could email the files to me at simplyshivani@gmail.com.

Thanks & Regards,
Shivani Dubey

In India, company policies are not supreme; here, we have DA principles. If anyone asks about the calculation of DA, either you give a suitable explanation to calculate it, or refrain from showing ignorance.

Regards,
Shemeer Khan