Dearness allowance
Cost-of-living Adjustment in India
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Key Takeaways
- Dearness Allowance (DA) is a cost-of-living adjustment, an increase made to the basic pay of government officials and public sector workers’ employees.
- Some private sector employees and civil servant, are pensioners in India.
- Indian citizens may receive a basic salary or pension that is then supplemented by a housing or a dearness allowance, or both.
- Dearness Allowance is a fully taxable allowance.
Dearness Allowance (DA) is a cost-of-living adjustment, an increase made to the basic pay of government officials and public sector workers’ employees. Public sector unit employees are also government employees, but not civil servants. Some private sector employees and civil servant, are pensioners in India.
Dearness Allowance is calculated as a percentage of an Indian citizen's basic salary to mitigate the impact of inflation on people. Indian citizens may receive a basic salary or pension that is then supplemented by a housing or a dearness allowance, or both. The guidelines that govern the Dearness Allowance vary according to where one lives. Dearness Allowance is a fully taxable allowance.
The two types of Dearness Allowance are:
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