Hi all, How to calculate dearness allowance? Pls help me. thanks, sankar
From India, Chennai
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2From India, Chennai
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Dearness Allowance is a cost-of-living adjustment allowance that the government pays to employees of the public sector as well as pensioners. The DA component of the salary is applicable to employees in both India and Bangladesh.
Dearness Allowance can be understood as a 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 varies for employees based on their location, whether urban, semi-urban, or rural.
Calculation of Dearness Allowance:
After the Second World War, the DA component was introduced by the government. Since 2006, the formula for calculating dearness allowance has changed. 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.
Since 1996, DA has been included to compensate for price rises or inflation in a financial year. It is revised twice a year, in January and July.
Industrial Dearness Allowance (IDA) is applicable to employees of public sector enterprises. The government of India recently increased IDA by 5% for this sector, benefiting 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) to compensate for rising inflation.
Variable Dearness Allowance (VDA) is the result of a biannual revision for central government employees. The changed figure, considering the increase or decrease in the Consumer Price Index (CPI), determines VDA. The three components of VDA are the consumer price index, base index, and the variable DA amount fixed by the government of India. The third component remains fixed until the government revises minimum wages, while the base index remains fixed for a period, with only the CPI changing monthly and affecting the overall value of the variable dearness allowance.
From India, Surat
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Dearness Allowance can be understood as a 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 varies for employees based on their location, whether urban, semi-urban, or rural.
Calculation of Dearness Allowance:
After the Second World War, the DA component was introduced by the government. Since 2006, the formula for calculating dearness allowance has changed. 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.
Since 1996, DA has been included to compensate for price rises or inflation in a financial year. It is revised twice a year, in January and July.
Industrial Dearness Allowance (IDA) is applicable to employees of public sector enterprises. The government of India recently increased IDA by 5% for this sector, benefiting 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) to compensate for rising inflation.
Variable Dearness Allowance (VDA) is the result of a biannual revision for central government employees. The changed figure, considering the increase or decrease in the Consumer Price Index (CPI), determines VDA. The three components of VDA are the consumer price index, base index, and the variable DA amount fixed by the government of India. The third component remains fixed until the government revises minimum wages, while the base index remains fixed for a period, with only the CPI changing monthly and affecting the overall value of the variable dearness allowance.
From India, Surat
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Dear Amit sir,
Our company's salary structure does not contain DA/IDA or VDA components. However, our existing state minimum wage (MW) is 6456/- plus 378/- VDA. I am considering adding a DA or VDA component by revising the salary structure. Please clarify whether DA, VDA, or IDA will be applicable since it is a private limited company. Also, kindly explain the calculation for the same with an example if possible.
Regards,
Amit Gupta
From India, Jaipur
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Our company's salary structure does not contain DA/IDA or VDA components. However, our existing state minimum wage (MW) is 6456/- plus 378/- VDA. I am considering adding a DA or VDA component by revising the salary structure. Please clarify whether DA, VDA, or IDA will be applicable since it is a private limited company. Also, kindly explain the calculation for the same with an example if possible.
Regards,
Amit Gupta
From India, Jaipur
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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 when computing the minimum rates of wages.
If an employer is paying wages to workers that are equal to or higher than the 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. The first is the Consumer Price Index, the second is the base index, and the third is the variable DA amount fixed by the government of India. The third component remains fixed until the government revises the minimum wages. Similarly, the 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) in a ratio of 70:30.
FDA may vary from one organization to another, but VDA is calculated at a rate that is agreed upon. VDA is revised twice a year on 1st April and 1st October. VDA is related to the Consumer Price Index (CPI).
We know that VDA is a part of DA. Salary will include "Basic Salary and Variable Dearness Allowance," whether it is a private firm or anything else.
From India, Surat
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If an employer is paying wages to workers that are equal to or higher than the 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. The first is the Consumer Price Index, the second is the base index, and the third is the variable DA amount fixed by the government of India. The third component remains fixed until the government revises the minimum wages. Similarly, the 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) in a ratio of 70:30.
FDA may vary from one organization to another, but VDA is calculated at a rate that is agreed upon. VDA is revised twice a year on 1st April and 1st October. VDA is related to the Consumer Price Index (CPI).
We know that VDA is a part of DA. Salary will include "Basic Salary and Variable Dearness Allowance," whether it is a private firm or anything else.
From India, Surat
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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........
From India, Jaipur
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From India, Jaipur
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Practically, at the junior level, it ranges from 10-15% of fixed pay (i.e., basic salary). At the middle level, it ranges from 15-30%, and at the senior level, it ranges from 30-50%, or as per your company's payroll fixation.
This represents the latest trends in payroll structures.
From India, Surat
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This represents the latest trends in payroll structures.
From India, Surat
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Dearness Allowance.xls
The Tamil Nadu Minimum Wages Dearness Allowance Notification March 2019.pdf