Recently, the Modi government at the Center had increased the dearness allowance (DA) of central employees and pensioners by 2 percent, after which the DA increased from 53% to 55%. The new rates have been made effective from January 2025. Now the next DA hike is to be done in July 2025, which will depend on the CPI-IW index data from January to June released by the Ministry of Labour.

It is expected to be announced around October 2025. However, this revision in DA may be the last as the 8th Pay Commission is likely to be implemented from January 1, 2026. So, government employees and pensioners need to know what is going to happen next.

Dearness allowance of central employees increases twice a year

The central government revises the dearness allowance and relief rates of employees and pensioners twice a year. This revision takes place in January and July, depending on the half-yearly (January to June / July to December) data of the AICPI index. These figures are released on the 30th or 31st of every month. Dearness Allowance is given to employees to provide relief from rising inflation.

How much can the dearness allowance increase in July 2025

So far, the CPI-IW index figures for January, February, and March have been released by the Ministry of Labour. In January 2025, the AICPI index was 143.2, but in February, the AICPI-IW fell by 0.4 points to 142.8. However, in March it rose back to 143.0 with a gain of 2 points, taking the DA score to 57.06%. The figures for April, May, and June are yet to come, after which it will be decided how much DA will increase from July 2025.

If this trend continues and there is a jump in AICPI points in the next 3 months and the DA score crosses 58%, then an increase of 3% can be expected. But if the marks fall, then DA may see a hike of up to 2%, like in January. So, employees will have to wait a bit for the next hike.

How much can DA increase from 55% in July 2025

DA is expected to increase from 55% to 57% or 58% in July 2025! However, official confirmation is yet to be made. For example, if an employee’s basic salary is ₹18,000, then at 57% DA it will be ₹10,260 and at 58% DA it will be ₹10,440. This hike will give a good increase to the take-home salary of employees.

How is dearness allowance calculated

There is a fixed formula to calculate the dearness allowance of central government employees and pensioners. The formula is as follows:

7th CPC DA% = [{12-month average of AICPI-IW (base year 2001=100) for the last 12 months – 261.42}/261.42×100]

This formula will apply to central government employees and pensioners who receive salaries based on the recommendations of the 7th Pay Commission.

For example:

DA% = (392.83-261.42)/261.42×100 = 50.26

The average CPI-IW for the last 12 months is 392.83. As per the formula, DA comes to 50.28% of the basic pay. Hence, the central government can increase the dearness allowance by 50%, ignoring the decimal points.