dearness allowance and dearness pay

Querist : Anonymous (Querist) 27 January 2011 This query is : Resolved
what is differece between dearness allownce and dearness pay.Iam confused with two expressions DA (enters into retirement benefits)and DA (does not forming part of salary).please clarify me sir.

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R.Ramachandran (Expert) 27 January 2011
Dear Allowance is an allowance granted to the employees to compensate for the cost of inflation. The Dearness Allowance will not carry any add on benefit.

However, when certain portion of the Dear Allowance is converted into Dearness Pay, then the applicable allowance would get calculated on (Basic Pay + Dearness Pay).

For instance normally Dearness Allowance is calculated as a % of Basic Pay.
In cases where there is Dearness Pay, then the Dearness Allowance would get calculated on (Basic Pay + Dearness Pay). To that extent the employee would get increased amount in absolute terms.

Such DP is also taken into account at the time of arriving at the pension benefits etc.

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