Good news for over 1.2 crore central government employees and pensioners! The centre is expected to announce a 3% hike in dearness allowance (DA) for serving employees and dearness relief (DR) for retirees. The announcement, which usually comes before the Diwali festival every year, is likely to be made in the first week of October.
After the next revision, the DA of the employees will increase from 55% to 58%. This increase will be applicable retrospectively from July 2025, and arrears are likely to be disbursed with 3 months’ arrears in the October month’s salary.
The Centre hikes DA twice every year – first revision before the Holi festival for the January-June cycle and the second around Diwali for the July-December period. This year, Diwali falls on October 20-21, so in all probability, the government will announce the DA hike as a Diwali gift to central employees.
Last year, the Modi government had announced the DA hike on October 16, almost a fortnight before the Diwali festival.
How DA is calculated under the 7th Pay Commission
DA is calculated by the formula fixed under the 7th Pay Commission.
In this, the average of 12 months’ CPI-IW (Consumer Price Index for Industrial Workers) is taken. The average from July 2024 to June 2025 was 143.6. On this basis, DA comes out to be 58%. That is, for July-December 2025, DA will increase from 55% to 58%.
Salary and pension examples: How much extra employees will get every month
If an employee’s basic salary is Rs 18,000 (the minimum basic as per 7th CPC), then according to the old DA (55%), he was getting Rs 9,900. Now, according to the new DA (58%) it will be Rs 10,440. That is, about Rs 540 more will be available every month. On the other hand, if someone’s basic pension is Rs 20,000, then there will be an increase of about Rs 600. This increase is entirely based on CPI-IW data.
Why this hike is special: Last DA revision under 7th CPC
This hike is also special because it will be the last DA hike of the 7th Pay Commission. The term of the 7th CPC is ending on 31st December 2025. Now all eyes are on the government to see how it expedites the 8th Pay Commission process. It is yet to finalise the Terms of Reference (ToR), which will be a reference guide for the panel once it starts working. The appointment of members and the chairman of the 8th Pay Commission is still pending.
8th Pay Commission on the horizon: When to expect new salary structure
The 8th Pay Commission was announced in January 2025. Based on past experiences, it may take up to 24 months to implement the recommendations of the commission. That is, the new salary system can be implemented probably by the end of 2027 or early 2028.
Different projections: How much salary may rise under the 8th CPC
Different estimates have come out regarding the increase in salary. Ambit Capital says that the salary of the employees can increase by 30-34%. On the other hand, Kotak Institutional Equities estimates that the effective hike under the 8th Pay Commission will be only around 13%, as the DA will be reset.