Dearness Allowance (DA) is an allowance paid by the government to its employees and pensioners to offset the impact of inflation. It is a cost of living adjustment that is calculated as a percentage of the basic salary to help employees cope with the increasing prices. DA is calculated twice a year, in January and July, as it is provided to employees to protect against the price rise in a particular financial year. The formula to calculate DA was changed in 2006 by the government. Presently, DA is calculated as per the following formula: For Central Government Employees DA% = . DA varies from employee to employee based on their presence in the urban, semi-urban, or rural sector, as the impact of inflation varies according to the location of the employee. DA is added to the basic salary along with other components such as House Rent Allowance (HRA), Conveyance Allowance, and more to form the total salary. There are mainly two types of DA: Fixed Dearness Allowance and Variable Dearness Allowance. Fixed Dearness Allowance is a constant amount that is added to the employee’s basic salary as a part of their compensation package, while Variable Dearness Allowance is calculated as a percentage of the employee’s basic salary and is adjusted twice a year, depending on the inflation rate and other economic factors.