Dearness Allowance (DA) was recently increased by 3% to 53% for central government employees. Dearness relief (DR) has also been increased by 3% to 53% for central government pensioners. The revised DA comes into effect on July 1, 2024. There has been speculation whether DA and DR would be automatically merged into the basic salary component once DA crosses 53%. Indeed, a similar merger occurred in the past when DA crossed that 50% threshold.

Will the DA or DA merge with the basic salary of central government employees and pensioners?

Will DA or DR be automatically merged into base salary now that they have crossed the 50% mark? The answer is no. “The increase in DA will not be included in the basic salary of a central government employee,” says Debjani Aich, partner at IndusLaw.

Sanjeev Kumar, Partner, Luthra and Luthra Law Offices, India, says, “The 7th Pay Commission report does not recommend any such measure. »

Vishal Gehrana, senior partner at Karanjawala & Co. and an advocate on record at the Supreme Court, says, “In earlier systems like the 5th Central Pay Commission, when the DA reached 50%, it was merged with the basic pay to simplify salary structures and ensure that employees’ base salary reflected real-time inflation requirements. This was seen as a way to avoid an indefinite increase in DA, which could create distortions in pay systems, especially since DA often represents a higher percentage of salary than other elements. discontinued under the 6th and 7th Central Pay Commissions, which adopted a more flexible approach to managing the pay structure.

Aich says: “This was clarified by the Department of Expenditure (DoE) on October 21, 2024, through an office memorandum stating that DA will continue to be a separate element of remuneration and will not be included in the scope of remuneration. “as defined in the Fundamental Rules (FR) applicable to State agents.”

Aich explains: “Under FR 9(21), “Salary” means the amount received monthly by a government servant as (i) salary, other than special salary or salary granted on account of his personal qualifications, who has been sanctioned for a position which he occupies substantially or as an officer or to which he is entitled by reason of his position in a cadre; (ii) overseas remuneration, special remuneration and personal remuneration; and (iii) any other emolument which may be specially classified as; Remuneration by the President has been clarified to be excluded from the above DoE definition of “salary”. This approach is largely in line with the Wages Code, 2019, where dearness allowance is a separate item in addition to that of an employee. base salary (and any withholding allowance).”

Will there be a change in the salary structures of central government employees now that the DA has reached 53%?

Responding to this, Gehrana says, “Under the 7th Central Pay Commission, the new system has evolved wherein crossing the 50% DA threshold does not automatically increase other allowances. Currently, the revision of these elements is not directly linked to the DA but is subject to a separate decision by the Government of India. In simple words, without official notification or policy from the Government of India, there will be no change in allowances like HRA or TA, even if DA reaches the 53% mark. “It is likely that the government will announce an increase in other allowances such as HRA, as these allowances are also linked to the cost of living of a government employee. There has been no official notification yet to this subject.”