How is DA calculated on basic pay?

Dearness allowance is a straight percentage of basic pay: DA amount = basic pay × DA rate ÷ 100. If your basic pay is ₹44,900 and the DA rate is 55%, your DA is ₹24,695 per month. DA is calculated on basic pay alone — not on gross salary, and not on basic plus other allowances.

What is the formula for DA percentage for central government employees?

For employees on the 7th CPC, DA% = [(average AICPI-IW for the last 12 months − 261.42) ÷ 261.42] × 100, where 261.42 is the base index for the 2016 revision. The figure is announced twice a year and rounded to the nearest whole percent. Public sector employees use a separate quarterly formula with a different base.

How many times a year is DA revised?

Twice. Central government DA is revised with effect from 1 January and 1 July each year, though the announcement usually comes several months later — typically in March and October. Because the effective date precedes the announcement, employees receive arrears covering the intervening months.

How do you calculate DA arrears?

Arrears = basic pay × (new DA rate − old DA rate) ÷ 100 × number of months between the effective date and the month the new rate was actually paid. For a ₹44,900 basic with DA rising from 53% to 55% and three months of arrears: 44,900 × 2% × 3 = ₹2,694. The arrears calculator above does this for you, including DA on transport allowance.

Is DA payable on transport allowance?

Yes. Dearness allowance is payable on transport allowance at the same rate as on basic pay, so a DA hike increases both your DA line and your TA line. It is not payable on HRA, which is calculated as a percentage of basic pay independently of DA.

What is the difference between DA and DR?

Dearness allowance (DA) is paid to serving employees and calculated on basic pay. Dearness relief (DR) is paid to pensioners and calculated on basic pension. Both are announced at the same rate and revised on the same dates, so a 2% DA hike is also a 2% DR hike for pensioners.

Is dearness allowance taxable?

Yes, DA is fully taxable as salary income for government and private employees alike, and it must be reported in your income tax return. It is also counted in the basic-plus-DA figure used for provident fund, NPS and gratuity calculations, which is why a DA hike raises your retirement contributions as well as your take-home pay.

What happens to DA when a new pay commission is implemented?

Accumulated DA is merged into revised basic pay and the DA counter restarts from zero. This is why the 7th CPC DA rate was 0% in January 2016 and had climbed past 50% by 2024. When the 8th CPC is implemented, the prevailing DA will be absorbed into the new basic pay rather than paid on top of it.

DA Calculator — Dearness Allowance & DA Arrears Calculator

Basic pay ₹ per month

Previous DA rate (%)

New DA rate (%)

Recent central government DA rates

Transport allowance (optional)

DA is payable on TA at the same rate

Arrear months

Months between the effective date and first payment

Enter your basic pay to calculate dearness allowance and arrears.

How Dearness Allowance Is Calculated

The basic formula

DA amount = Basic pay × DA rate ÷ 100

The most common error is applying DA to gross salary. It is not. DA is calculated on basic pay alone — not on HRA, not on special pay, and not on the gross figure at the bottom of your payslip. The one exception is transport allowance, on which DA is separately payable at the same rate.

Where the DA percentage comes from

The rate is not set arbitrarily. It is derived from the All India Consumer Price Index for Industrial Workers (AICPI-IW) published monthly by the Labour Bureau:

DA% = [(12-month average AICPI-IW − 261.42) ÷ 261.42] × 100

The 261.42 base corresponds to the 7th CPC revision in 2016. Public sector undertakings use a different formula revised quarterly against a different base, which is why PSU DA rates never match central government rates.

Why arrears happen

DA is revised with effect from 1 January and 1 July, but the Cabinet usually approves the new rate in March and October respectively. Those intervening months are paid as arrears in a lump sum.

Arrears = Basic pay × (New rate − Old rate) ÷ 100 × Arrear months

A worked example: basic pay ₹44,900, DA rising from 53% to 55%, three months of arrears. The monthly increase is 44,900 × 2 ÷ 100 = ₹898, so arrears are ₹898 × 3 = ₹2,694. Add DA on transport allowance and the figure rises a little further.

7th CPC DA rate history

Effective from	DA rate	On ₹18,000 basic	On ₹44,900 basic
Jan 2016	0%	₹0	₹0
Jul 2016	2%	₹360	₹898
Jan 2017	4%	₹720	₹1,796
Jul 2017	5%	₹900	₹2,245
Jan 2018	7%	₹1,260	₹3,143
Jul 2018	9%	₹1,620	₹4,041
Jan 2019	12%	₹2,160	₹5,388
Jul 2019	17%	₹3,060	₹7,633
Jul 2021	28%	₹5,040	₹12,572
Oct 2021	31%	₹5,580	₹13,919
Jan 2022	34%	₹6,120	₹15,266
Jul 2022	38%	₹6,840	₹17,062
Jan 2023	42%	₹7,560	₹18,858
Jul 2023	46%	₹8,280	₹20,654
Jan 2024	50%	₹9,000	₹22,450
Jul 2024	53%	₹9,540	₹23,797
Jan 2025	55%	₹9,900	₹24,695

Note the gap between July 2019 and July 2021 — three DA instalments were frozen during the COVID-19 pandemic and later restored without arrears for the frozen period.

DA vs DR, and the knock-on effects

Serving employees receive dearness allowance on basic pay; pensioners receive dearness relief on basic pension. Both move at the same rate on the same dates.

A DA hike does more than raise take-home pay. It also increases:

Your NPS or provident fund contribution, which is 10% of basic plus DA
Your employer's matching contribution, at 14% for central government NPS
Gratuity, which is calculated on last-drawn basic plus DA
Your taxable income, since DA is fully taxable as salary
Transport allowance, because DA is payable on TA

The net effect is that in-hand gain from a DA hike is roughly 85–90% of the gross increase once retirement contributions and tax are accounted for.

What happens at a pay commission

Accumulated DA is merged into revised basic pay and the counter restarts at zero. That is why the table above starts at 0% in January 2016 and had climbed past 50% by 2024. When the 8th CPC takes effect, the prevailing DA will be absorbed into the new basic rather than paid on top — which is the single biggest reason a large fitment factor delivers a much smaller in-hand rise than it appears to promise.

DA Calculator