Almost 18 months later, Dearness Allowance (DA) arrears are to be given to central government employees. The decision of the government has brought a sigh of relief to the hopeful; so many workers lost out on allowances during this period.
Why DA Is Important & What Led To Delay
Dearness Allowance forms part of an employee’s basic pay; it is designed to offset inflation and maintain his purchasing power. However, because of financial constraints during the pandemic, the increase was stopped by the government. Employees were never paid the increment which they should have earned in the frozen period.
Determination on Payment Of Arrears
The Government has set up a mechanism to pay the arrears:
- List Preparation – Every ministry and department should prepare lists of employees who are entitled.
- Verification – These lists will be verified, so that only eligible employees will receive payments.
- Calculation – During this stage, the payments will be finalized by determining the accrued arrears based on the difference between the frozen DA rate and the rate that should have been paid to the concerned employees.
- Disbursement – The final amounts will be deposited to the accounts of employees directly. A special committee for monitoring has been formed to ensure the smooth execution of the scheme without any delays at any stage.
Department-Wise Budget Allocations
For smooth execution, the scheme was allotted separate budgets department-wise:
- Education Ministry: ₹10 crores for about 5,000 employees
- Health Ministry: ₹7 crores for about 3,000 employees
- Home Ministry / Police: According to number of employees in the department
- Departments such as Defence, Railways, and Postal have been included with proportionate allocation of budgets.
Tax & Financial Implications
Reception of arrears can bring in tax implications:
- The arrears are considered as income in the year they are paid; hence, they are taxable.
- An employee may get relief under Section 89(1) of the Income Tax Act in the form of alleviating tax dues on the arrear income.
- It is advisable to plan financial investments for the efficient management of additional income.
Advantages Outside Money
The decision carries consequences even beyond monetary benefits:
- Immediate cash in hand, which means a lot for daily expenses.
- A morale enhancer- acknowledging employees for their service and relieving the frustration of delay.
- Provision for pressing needs: education, health, and family welfare.
- Opportunity for investing into arrears for future benefits.
What The Employees Should Do Now
- Check if you are on your department’s eligible list.
- Keep a watch for official announcements as to the exact amounts and the dates of payment.
- Know your tax liabilities so that you can plan accordingly.
- And spend the extra income wisely, be it on debt repayment, investments, or savings.
Also Read: 7th Pay Commission Latest Update: DA Hike Confirmed, Festive Salary Boost Coming Soon