The dearness allowance is a financial benefit paid to government employees in certain cities to compensate them for the cost of living in those cities. It is calculated based on the cost of living index (COLI) of the city.

Eligibility:

• Government employees who are posted in cities where the COLI is higher than the national average.
• Employees who are on deputation or transfer to such cities.

Rate of Dearness Allowance:

The dearness allowance is paid at a rate of 20% of the basic pay for each employee. The actual amount of the allowance varies based on the cost of living in the city. For example, employees posted in Mumbai get a dearness allowance of 34%, while employees posted in Delhi get a dearness allowance of 26%.

Eligibility Conditions:

• The employee must be a regular employee of the government.
• The employee must be posted in a city where the COLI is higher than the national average.
• The employee must have completed a minimum service period.

Additional Benefits:

• The dearness allowance is taxable income, but it is exempt from income tax for government employees.
• The dearness allowance is also provided to pensioners.

Note:

The dearness allowance is a separate benefit from the house rent allowance (HRA). HRA is a separate allowance paid to government employees who are posted in cities where the cost of living is higher than the national average.