What is Dearness Allowance? #
Dearness allowance is calculated as a fixed percentage of the basic salary and given to employees against inflation and changing economic pressure. Dearness allowance is fully taxable at the hands of the employee.
Dearness allowance is known as DA by its short form in India and is usually part of the salary component in government and public sector companies’ employees’ salary packages. Since DA is incremental by every year it is very famous among government employees.
Inflation is one of the economic factors which affects the purchasing capacity of the individual and to cover the risk of inflation the dearness allowance (DA) is designed to be part of the employees’ salary packages.