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DA Merger News: Employee organizations have demanded that 50% of DA be merged into basic pay to provide relief from rising inflation and increase their total earnings. This will also impact PF.

8th Pay Commission DA Merger: Several groups representing central government employees and pensioners want the dearness allowance (DA) under the Eighth Pay Commission to be merged with the basic pay to provide some relief to employees facing rising inflation. Since the 8th Central Pay Commission is currently busy preparing its report, employee groups hope that DA can be merged with the basic pay.

What is DA?

DA is a portion of an employee's basic salary designed to mitigate the impact of inflation on their cost of living. An increase in DA increases an employee's take-home pay, providing some relief from inflation.

DA increases twice a year

The government typically announces DA increases twice a year—once in March (for the January-June period) and once in September/October (for the July-December period). This is calculated based on the All-India Consumer Price Index for Industrial Workers (AICPI-IW). Under the 7th Pay Commission, DA calculations for central government employees were performed using the following formula: DA% = (Average AICPI (12 months) – 261.42) / 261.42 × 100. The number 261.42 used in this formula is the 12-month average AICPI-IW at the time of the 7th Pay Commission's inception, based on the 2016 base year. This is the basis for calculating inflation.

In April of this year, the Modi government announced a 2% increase in DA for central government employees and pensioners. With this change, DA has been raised from 58 percent of basic pay to 60 percent.

Many benefits of DA merger

• The first advantage is that it increases your take-home salary. With more money in hand, your lifestyle will also change accordingly.
• With the increase in basic pay, the PF contribution from both the employee and the government will increase, which will result in a bigger retirement corpus.
• Gratuity and leave encashment will also benefit, as gratuity is also calculated based on DA. A stronger basic pay raise will translate into lakhs of rupees in gratuity and earned leave payments upon retirement.
• The DA merger rule will apply to both serving employees and pensioners. DR will be merged, resulting in an increase in monthly pensions.