Dearness Allowance (DA) is an important component of an employee’s salary that helps to offset the impact of inflation on their purchasing power. It is calculated based on the average Consumer Price Index (CPI) for Industrial Workers over a specific period of time. In this blog post, we will explain how to calculate Dearness Allowance using a simple formula.
The formula to calculate Dearness Allowance is as follows:
Dearness Allowance = (Average of AICPIN for the past 12 months – 90.76) * 100 / 90.76
Let’s break down the formula:
- AICPIN: AICPIN stands for All India Consumer Price Index. It is a measure of changes in the cost of living for industrial workers in India.
- Average of AICPIN for the past 12 months: To calculate the DA, you need to find the average of the AICPIN for the past 12 months.
- 90.76: This is the fixed base year index for calculating the DA.Once you have the average of AICPIN for the past 12 months, subtract 90.76 from it and multiply the result by 100. Finally, divide the obtained value by 90.76 to get the Dearness Allowance percentage.
For example, if the average of AICPIN for the past 12 months is 134, the calculation would be as follows:
Dearness Allowance = (134 – 90.76) * 100 / 90.76 = 47.97% (As on 30 october 2024)
So, the Dearness Allowance in this case would be approximately