The central government is expected to announce an increase in Dearness Allowance (DA) and Dearness Relief (DR) next week.
This decision will benefit over 1.2 crore government employees and pensioners. According to media reports, the government may officially announce this hike before Holi.
The DA is revised twice a year, in January and July, but the official announcement takes some time. Generally, the January increase is announced before Holi, while the July increase is declared around Diwali.
The purpose of this allowance is to help employees cope with inflation and maintain their purchasing power.
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Expected DA Increase
Based on the December 2024 figures, the government may increase DA by 3%, which will take the total DA and DR to 56%. However, the final decision will be made by the Union Cabinet, headed by the Prime Minister.
How is DA Calculated?
The Dearness Allowance (DA) is calculated based on the All India Consumer Price Index for Industrial Workers (AICPI-IW). The formula used for DA calculation varies for central and public sector employees:
DA Formula for Central Government Employees:
DA (%) = [(Average AICPI of last 12 months – 115.76) / 115.76] × 100
DA Formula for Public Sector Employees:
DA (%) = [(Average AICPI of last 3 months – 126.33) / 126.33] × 100
Previous DA Hikes
March 2024: DA was increased from 46% to 50%. This was announced on March 7, 2024, just before Holi.
October 2024: Another 3% increase took DA to 53%, effective from July 1, 2024.
8th Pay Commission and Future DA Revisions
The 8th Pay Commission is expected to be implemented in 2026. During this time, the government will decide whether DA should be merged into the basic salary.
The final recommendations of the 8th Pay Commission are likely to be ready by the end of the financial year 2025-26, with implementation in 2026.
Under the 7th Pay Commission, two DA hikes are expected in 2025 and one in 2026 before the new pay commission takes effect.