DA - Dearness Allowance Calculation Process

How To Calculate DA (Dearness Allowance)



July 20, 2024

  • DA, or Dearness Allowance, is an amount paid to employees or pensioners as a cost of living adjustment.
  • It is meant to compensate for the increased cost of living due to inflation.
  • The calculation of DA can vary depending on the organization or government rules, but a common method for calculating DA is as follows:
  1. Base Year: Choose a base year (usually a specific year) for your calculation. The base year represents the starting point for calculating DA. For example, let’s use the base year 2020.
  2. Index Numbers: You need to obtain the All India Consumer Price Index Numbers (CPI) for both the base year and the current year. The CPI measures the average change in prices paid by consumers for a basket of goods and services. You can find this data from official government sources, such as the Labor Bureau or the appropriate government agency.
  3. Calculate Inflation: Find the inflation rate by using the formula:Inflation Rate = (CPI of the Current Year – CPI of the Base Year) / CPI of the Base Year
  4. Calculate DA: The DA can be calculated using the following formula:DA = (Inflation Rate / 100) x Basic Salary
    • In this formula, “basic salary” represents the employee’s basic salary, to which DA is applied as a percentage.
  5. Add to Basic Salary: Once you’ve calculated the DA, you would add this amount to the employee’s basic salary to determine their revised salary with the DA included.
  • Please note that the actual calculation of DA can vary between organizations and government bodies, and there may be different rules and components to consider.
  • The above calculation process is the Basic Calculation Process (DA) (Dearness Allowance in India).
  • Be sure to consult the relevant rules and guidelines provided by your employer or the government for an accurate calculation of DA.
  • Additionally, the base year, index numbers, and calculation methodology may change over time, so make sure to use the most current data and guidelines for your calculations.