How to calculate dearness allowance?

As a salaried worker, I have a fair knowledge of the dearness allowance that is included in my pay. A basic set income and a few extras make up your pay. Your take-home payment is calculated as the sum of your base salary and incentives. So let me tell you more about how to calculate dearness allowance in salary for private companies.

How to calculate DA?

The Central Government modified the method for calculating the dearness allowance after 2006. The computation for central government personnel, people working in the public sector, and retirees is as follows.

How to calculate DA for the central government employees?

Dearness Allowance% = ((Average of AICPI (Base Year 2001=100) for the previous 12 months -115.76)/115.76)*100.

How to calculate DA for the private sector employees?

Dearness Allowance% = ((Average of AICPI (Base Year 2001=100) for the previous three months -126.33)/126.33)*100. 

This is the dearness allowance calculation formula.

What is dearness allowance in private sector?

All private sector workers are paid a base pay as well as a preset percentage of that base income as a dearness allowance to cover rising living expenses. This DA is included in the take-home payment together with a number of other allowances. DA or dearness allowance is a significant component of the monthly wage.

Now you know how to calculate dearness allowance.

Well, dearness allowance is a cost of living adjustment that the govt. pays to pensioners as well as public sector employees. It is calculated as a %age of basic salary to deal with inflation’s effect. Let me tell you how to calculate DA for private companies and government companies.

I want you to know that the private sector employees are not entitled to receive the dearness allowance in their salary.

Dearness Allowance % = [( Average of AICPI ( Base Year 2001 = 100) for the last three months – 126.330)/126.330]x100

Note: The full form of AICPI is All-India Consumer Price Index.

Dearness Allowance % = [( Average of AICPI ( Base Year 2001 = 100) for the last twelve months – 115.760)/115.760]x100

The pension for retired public-sector employees is revised when a pay commission introduces a new salary structure. When dearness allowance increases, the corresponding surge is reflected in the pension of retired public sector employees. This applies to both regular and family pension.

I hope I cleared all your doubts on how to calculate DA.