Next DA hike: Will central govt employees see an increment next week before Holi?

The Central government may increase Dearness Allowance (DA) and Dearness Relief (DR) for its employees and pensioners next week before Holi. This increment will benefit more than 1.2 crore central government employees and pensioners.

The government conducts reviews of the dearness allowance twice a year, in January and July. The DA increase, typically finalized in January, is announced around Holi in March to provide relief to employees before the festival. On the other hand, the July hike is usually announced around Diwali in October or November each year.

It is to be noted that during its meeting in New Delhi on March 5, 2025, the Cabinet did not discuss the dearness allowance (DA) hike for central government employees.

The latest increase in the DA occurred in July 2024, as it rose to 53% from 50%. On March 7, 2024, the Cabinet raised the DA to 50% of basic pay from the previous rate of 46%. This announcement was made a few days before Holi on March 25, 2024.

On October 16, 2024, the Cabinet approved a 3% increase in Dearness Allowance (DA) for central government employees and Dearness Relief (DR) for pensioners under the 7th Pay Commission. This adjustment brought both DA and DR to 53%. The revised rates were set to take effect from July 1, 2024.

How is DA calculated?

The calculation of the Dearness Allowance (DA) rate is determined by the All India Consumer Price Index for Industrial Workers (AICPI-IW) provided by the Labor Bureau in Shimla. Central government employees have their DA calculated using a specific formula.

DA (%) = [(Average AICPI for the past 12 months (Base Year 2001=100) - 115.76) / 115.76] x 100

For public sector employees, DA is calculated like this:

DA (%) = [(Average AICPI for the past 3 months (Base Year 2016=100) - 126.33) / 126.33] x 100

8th Pay Commission

In January 2025, the Centre made the long-awaited decision to establish the 8th Pay Commission, which is expected to present its recommendations to the government early next year. Since the formation of the pay panel was announced, there has been widespread speculation about the potential adjustments to the salary and pension of employees and pensioners. 

It is important to note that the Pay Commission's mandate goes beyond merely increasing salaries; it also entails a comprehensive review of allowances and other benefits provided to central government employees. Reports indicate that the Commission may do away with outdated or irrelevant allowances while introducing new ones where necessary. The 7th Pay Commission similarly revoked several allowances.

The 7th Pay Commission assessed 196 allowances, ultimately approving 95 and rejecting 101. Some allowances were eliminated entirely, merged with other allowances, or omitted from the final report. In terms of salary adjustments, the Commission proposed a salary increase for central employees, with a fitment factor of 2.57 leading to a minimum salary of Rs 18,000 and a maximum salary of Rs 2,25,000.

What's expected?

After its formation, the 8th Pay Commission is expected to spend approximately a year to compile its findings. Throughout this period, the commission will engage in consultations with a variety of parties, including the delegates of federal workers, to gather insight into their needs and draft suggestions accordingly.