The Union Cabinet has approved a 2% hike in Dearness Allowance (DA) for central government employees, raising it from 58% to 60%, according to an official statement.
The move, which comes after a delay this year, will also push up Dearness Relief (DR) for pensioners by the same margin, benefiting lakhs of retirees.
“The Union Cabinet chaired by Prime Minister Narendra Modi has approved to release an additional instalment of Dearness Allowance (DA) to Central Government employees and Dearness Relief (DR) to pensioners w.e.f. 01.01.2026 representing an increase of 2% over the existing rate of 58% of the Basic Pay/Pension, to compensate against price rise,” said the statement.
The combined impact on the exchequer on account of increase in both DA and DR would be Rs 6,791.24 crore per annum, the government said. “This will benefit about 50.46 lakh Central Government employees and 68.27 lakh pensioners.”
What this means for employees
The revised DA will be effective from January 1, 2026, and employees are expected to receive arrears for the past months along with upcoming salaries.
Since DA is calculated as a percentage of basic pay, the hike will translate into a direct increase in monthly salary across Levels 1 to 18 under the pay matrix.
Why DA was increased
DA revisions are linked to inflation and are typically revised twice a year based on the All India Consumer Price Index (AICPI).
The latest hike reflects rising cost of living and is aimed at protecting real income of government staff and pensioners.
Modest hike amid bigger pay expectations
While the increase offers some relief, it is relatively modest at a time when employee unions are pushing for larger salary revisions under the upcoming 8th Pay Commission.
The 2% DA hike may not be a windfall, but with arrears and a higher allowance base, it will still add to take-home pay and pension payouts, offering incremental relief against inflation.
Bigger changes being discussed
The DA hike comes at a time when employee groups are pushing for broader changes in the salary structure. These demands are tied to the proposed 8th Pay Commission, which is expected to review pay, allowances and pension-related issues.
In a memorandum to the government, the National Council–Joint Consultative Machinery (NC-JCM) has pitched for a significantly higher fitment factor of 3.83. If this proposal is accepted, the minimum basic pay could jump from Rs 18,000 to around Rs 69,000, potentially leading to a major overhaul of the overall pay structure.