What are DA & DR? - The 7th Pay Commission raises salaries and benefits for government employees. Dearness Allowance and Dearness Relief are the main components. Let’s take a quick look at how they will impact your finances.
What is the 7th Pay Commission? - It is a government body that surveys and suggests necessary changes to the laws governing employee compensation. The Act was officially put into work in 2016, and this impacts a large number of employees across the nation.
Dearness Allowance (DA) - DA is provided to balance out the consequences of inflation. The DA rate is modified by the Consumer Price Index, and to compute DA, a base percentage pay is used.
Dearness Relief (DR) - Dearness Relief is only applicable for the retired compared to DA. The DR uses a methodology of CPI-IW, and it helps to maintain the pace with increasing prices for the pensioners.
Calculation of DA & DR - The computation relies on the average of CPI-IW for DA and DR. Twice a year, the government releases updated rates. The formula differs for public sector undertakers and government workers.
Financial Impact: There’s an instant increase in your net pay or pension amount. With the help of such adjustments, the purchasing power is protected from inflation. Knowing the current affairs about DA & DR is critical for financial planning.
Once you understand the concept of the CPI-IW index, it will become easier for you to protect the future in a better way. Have a look into government websites to stay up to date.