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With reference to Dearness Allowance (DA), consider the following statements:
- DA is a cost of living adjustment that the Government pays to public sector employees and pensioners.
- DA is fully taxable for individuals who are salaried employees.
Which of the statements given above is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
With reference to Dearness Allowance (DA), consider the following stat...
The Central government is likely to increase the dearness allowance (DA) for its over one crore employees and pensioners by four percentage points to 42% from the existing 38%.
About Dearness Allowance (DA):
- What is it? DA is a cost of living adjustment that the Government pays to public sector employees and pensioners.
- Why is DA paid? To curb the effect of inflation.
- How is DA calculated?
- It is calculated as a percentage of the basic salary.
- DA for Central Government employees is calculated differently than that of public sector employees.
- The formula to calculate the DA was changed in 2006 by the Government.
- DA % for Central Govt Employees = {(All-India Consumer Price Index average (Base year 2001 =100) for the last 12 months -115.76)/115.76} x 100
- DA % for Public Sector Employees = {(All-India Consumer Price Index Average (Base year 2001 =100) for the last 3 months - 126.33)/126.33} x 100
- Since DA is based on the cost of living, this salary component is not fixed. DA varies from employee to employee based on their presence in the urban, semi-urban, or rural sectors.
- Taxability:
- DA is fully taxable for individuals who are salaried employees.
- It is compulsory to declare the tax liability concerning DA when filing an ITR.
Hence both statements are correct.
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With reference to Dearness Allowance (DA), consider the following stat...
Explanation:
DA is a cost of living adjustment:
- Dearness Allowance (DA) is indeed a cost of living adjustment that the Government pays to public sector employees and pensioners.
- It is provided to offset the impact of inflation on these individuals' standard of living.
DA is fully taxable for salaried employees:
- DA is considered as a part of an individual's salary and is fully taxable for salaried employees.
- It is included in the total income of the individual and taxed according to the applicable tax slabs.
Therefore, both statements 1 and 2 are correct as they accurately describe the nature of Dearness Allowance and its taxation for salaried individuals.
DA is a cost of living adjustment:
- Dearness Allowance (DA) is indeed a cost of living adjustment that the Government pays to public sector employees and pensioners.
- It is provided to offset the impact of inflation on these individuals' standard of living.
DA is fully taxable for salaried employees:
- DA is considered as a part of an individual's salary and is fully taxable for salaried employees.
- It is included in the total income of the individual and taxed according to the applicable tax slabs.
Therefore, both statements 1 and 2 are correct as they accurately describe the nature of Dearness Allowance and its taxation for salaried individuals.
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With reference to Dearness Allowance (DA), consider the following statements: DA is a cost of living adjustment that the Government pays to public sector employees and pensioners. DA is fully taxable for individuals who are salaried employees.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?
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