The one announcement that central government employees and pensioners are eagerly awaiting right now is the increase in dearness allowance (DA) and dearness relief (DR) for the January-June 2026 cycle. Typically, the government announces DA hikes twice – first around Holi and the second before or around Diwali festival.
But this time, even after Holi, there has been no official announcement, which has increased both curiosity and discussion among employees.
Meanwhile, another speculation is doing the rounds — is the government going to merge the existing DA into the basic salary?
How much can the DA rate increase?
The government revises DA twice every year—once effective January and the second time effective July.
Currently, central government employees receive 58% DA. Based on the latest inflation data, it is estimated that there could be an increase of approximately 2% for January 2026.
If this happens, the DA will increase from 58% to approximately 60%.
This estimate is based on the 12-month average of the AICPI-IW (All India Consumer Price Index – Industrial Workers) from January 2025 to December 2025, which was approximately 145.54.
The calculation results in a DA of approximately 60.33%, which is generally rounded off to 60%.
How is DA determined?
DA is calculated based on the AICPI-IW index, which is released monthly by the Labor Bureau.
This index measures changes in the prices of goods and services used by industrial workers.
The formula for calculating DA is as follows:
DA % = [{12-month average AICPI-IW − 261.42} ÷ 261.42] × 100
A conversion factor of 2.88 is also used to link the 2016 base index to the 2001 base.
Will DA be merged into basic salary?
Many employee organizations have demanded that since DA has exceeded 50%, it should be merged into basic salary.
But the government’s stance on this matter is clear.
In a written reply to Parliament in December 2025, the government stated that no proposal to merge DA into basic pay is currently under consideration.
The government believes that the current system of DA revision every six months is sufficient to compensate for inflation, so there is no need for any major structural changes.
So why is this demand being raised?
Employee organizations argue that merging DA into the basic salary will benefit employees in many ways.
-Basic salary will increase
-HRA, TA, and other allowances will also automatically increase
-There will also be a direct benefit in pension calculations
This is why many employee organizations are demanding that it be implemented as an interim relief until the 8th Pay Commission is implemented.
Why will the 8th Pay Commission take time?
The term of the 7th Pay Commission ended on December 31, 2025. Now the 8th Pay Commission has begun work, but its implementation may still take a significant amount of time.
Generally, it takes approximately 18 months for the Pay Commission to submit its report.
Following this, the review, cabinet approval, and implementation process take approximately 6 months.
Accordingly, it is difficult for the 8th Pay Commission’s recommendations to be implemented before the end of 2027.
In summary:
DA is expected to increase by approximately 2% for January-June 2026, potentially bringing the DA to 60%. However, despite demands from employee organizations, the government currently has no proposal to merge the DA with the basic salary.