Three old demands concerning the inflation allowance (DA) for civil servants and pensioners were once again raised during the work of the 8th Calculation Committee. The documents submitted by trade unions contain a request for quarterly changes to the DA, its inclusion in the base salary upon reaching a 25% level, and exemption from income tax.
It is noteworthy that all these proposals were first put forward more than 20 years ago, before the 6th Calculation Committee, but were not accepted then, and the 7th Calculation Committee also did not provide recommendations on them. Currently, the discussion of these demands has resumed, although a final decision on their implementation has not yet been made.
Currently, the increase in the inflation allowance for central employees and the inflation compensation allowance for pensioners usually occurs twice a year. Trade unions insist that changes to DA and DR should happen every three months to reduce the financial burden of rising prices on employees. 'Bharat Pensioners Samaj' requested a quarterly adjustment of DA/DR based on the average indicator over three months in its memorandum to the 8th Calculation Committee.
The community also emphasized that inflation compensation must be provided without any rounding or reductions. This requirement is not new; it was also presented to the 6th Calculation Committee, which rejected the proposal to review DA every three months instead of six months, citing a lack of strong justification. The committee recommended maintaining the existing system of reviewing DA twice a year, on January 1st and July 1st, which is still in use.
The second major claim relates to integrating DA into the base salary. The 'Federation of National Postal Organizations' (FNPO) demands that when DA or DR exceeds a 25% level, it be added to the base salary or base pension. Thus, the trade unions aim to avoid waiting until 50% is reached to include part of the inflation allowance in the base salary. However, this is only a proposal, and the 8th Calculation Committee has not yet made a decision on this matter.
The history of this demand is also long. The 5th Calculation Committee proposed creating an inflation allowance (Dearness Pay) by adding 50% of the DA to the base salary. Later, trade unions managed to lower this threshold to 25%. The 6th Calculation Committee clearly stated that it did not recommend adding DA to the base salary at any level, arguing that such a change might require adjusting the base index used for calculating inflation, which was not considered necessary in its proposed pay structure.
The third demand concerns the taxation of the inflation allowance. FNPO argues that DA compensates for additional expenses caused by inflation and demands its complete exclusion from the taxable base. The organization also proposed completely exempting allowances such as HRA and transport allowances from taxes. The argument is that the purpose of these allowances is to cover costs related to price increases, not to increase the real wealth or economic solvency of the employee.
Imposing taxes on these payments results in a portion of the inflation allowance effectively being returned as taxes. This demand was also presented to the 6th Calculation Committee, but it did not provide recommendations on it. Now, FNPO has raised this issue again before the 8th Calculation Committee. If this demand is adopted, it may affect the tax burden on employees. Currently, no new decision on tax benefits for DA has been made.
These three demands related to DA were recorded in Chapter 4.1 of the 6th Calculation Committee's report. However, the proposals for quarterly review and inclusion of DA in the base salary were not accepted, and the committee provided no recommendations on the issue of tax benefits. Subsequently, the 7th Calculation Committee also did not provide separate recommendations on these three demands in its report. In January 2014, DA exceeded the 100% level based on the 6th Calculation Committee's report. At that time, the employee side argued that the real value of the salary was decreasing because DA was not included in the base salary. However, this argument related to the date of salary revision implementation, not the new rule for including DA in the base salary.
Before the 8th Calculation Committee, the trade unions once again presented these three demands. Their goal is to accelerate inflation compensation, lower the threshold for including DA in the base salary, and reduce the tax burden on allowances. Currently, these are just demands, not approved rules. Whether the committee will accept these demands, modify them, or reject them, as previous committees have done, will only become clear after its recommendations and government decisions. Therefore, employees and pensioners should not assume that quarterly DA review, inclusion at 25%, or tax benefits are current provisions.