Friday, September 29, 2023

7th Pay Commission: Will the Central Government Announce a DA Hike for Government Employees After G20 Summit?

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With the release of the latest Consumer Price Index (CPI) data, Central government employees are anxiously awaiting a DA hike to cope with rising inflation. Retail inflation in July 2023 reached a 15-month high of 7.44 percent, significantly exceeding the Reserve Bank of India’s target of keeping retail inflation at 4 percent or lower.

A potential increase in Dearness Allowance (DA) is anticipated for Central government employees. Reports suggest that the government might announce a DA hike after the G20 summit in Delhi, which concludes on September 10. However, there has been no official confirmation of this.

Previously, a Ministry of Finance official told that the DA hike for Central government employees could be expected in the third week of September. The official also indicated that a 3% DA hike might be on the horizon for employees.

It’s worth noting that DA/DR is provided to Central government employees and pensioners as a relief measure to mitigate the impact of inflation on their in-hand salary and pension. The DA/DR hike is determined for government employees based on the formula recommended by the 7th Pay Commission.

Why is a 3% DA hike expected?

Given that retail inflation in the country reached a 15-month high in July, the dearness allowance hike translates to just over 3 percentage points. However, the government typically doesn’t raise DA/DR beyond the decimal point. Therefore, it is anticipated that a 3% DA hike will be announced in September 2023.

If the Centre announces a 3% DA hike, the DA rate for central government employees will rise to 45%, while the DR rate for pensioners will also increase to 45%. The DA hike, if announced, will be effective from July 1, 2023.

Government employees should be aware that the Centre revises the DA/DR rate semi-annually, and any announced hike takes effect on January 1 and July 1, respectively.

Who Will Benefit from the 3% DA Hike?

The next round of DA/DR hikes will benefit over 1 crore central government employees and pensioners. In March 2023, the DA/DR rate was increased from 38% to 42%.

How Will the DA Hike Impact Government Employees?

A DA hike will assist Central government employees in managing their budgets in the face of rising inflation. However, it’s important to note that an increase in DA could also lead to a higher tax liability due to the potential increase in overall salary.

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