The government seems to be on a gifting spree this year. After giving income tax benefits in the Union Budget, announcing a Dearness Allowance (DA) hike in March, and bringing GST reforms in September, it has now cleared another DA hike of 3% ahead of Diwali.
The Union Cabinet approved the proposal to increase the DA for central government employees and Dearness Relief (DR) for pensioners by 3%. With this revision, the DA rate now stands at 58%.
Union Minister Ashwini Vaishnaw said the move will benefit nearly 48 lakh central government employees and 68 lakh pensioners. The new rate will be effective from July 1, and the financial implication of this decision is estimated at Rs 10,084 crore.
WHAT THE HIKE MEANS FOR SALARIES AND PENSIONS
“Diwali came early this time for Govt employees and pensioner. This is because if an employee has a basic pay of Rs 22,500, a 3% DA hike will add Rs 675 to their monthly income or Rs 8,100 more annually. Likewise, a pensioner with a basic pension of Rs 12,000 will receive an extra Rs 360 per month, or Rs 4,320 a year,” said Abhishek Kumar, Sebi RIA and founder Sahaj Money.
Employees and pensioners will also receive arrears for July, August, and September along with their October salary or pension, just before Diwali. This festive timing is expected to give a boost to household budgets.
Earlier in March 2025, the government had raised the DA and DR by 2%, effective from January 1. That revision took the rate to 55% and helped employees and pensioners cope with higher living costs.
HOW DA IS CALCULATED
The Dearness Allowance is linked to inflation and is revised twice a year, usually in January and July. It is calculated using the Consumer Price Index for Industrial Workers (CPI-IW), which is released every month by the Labour Bureau under the Labour Ministry.
This time, however, there was a delay in the announcement. The Confederation of Central Government Employees and Workers (CCGEW) expressed concern, noting that normally the hike is announced in late September and arrears are paid in early October.
This 3% hike is expected to be the final revision under the 7th Pay Commission. The 8th Pay Commission is likely to take effect from January 2026, which could bring further changes to the pay and pension structure of government employees.
