There is good news for central employees and pensioners. Before the 8th Pay Commission starts, more than 1 crore employees and pensioners may get a DA increase. It is said that after Rakshabandhan, the Modi government may increase the dearness allowance by 3% to 4% from July 2025.

If this happens, DA may go up from 55% to 58% or 59%. This guess is based on the AICPI index data given by the Labour Ministry for January to May 2025. But the June data is not out yet. It will come on 30th or 31st July. After that, it will be clear how much DA will increase from July 2025.

Dearness Allowance Increases Twice a Year

The central government changes the rates of dearness allowance (DA) and dearness relief (DR) for employees and pensioners two times every year – in January and in July. This change depends on the inflation data taken from the All India Consumer Price Index (AICPI). The AICPI data is collected for two halves of the year – January to June and July to December.

For example, under the 7th Pay Commission, the government increased DA by 2% from January 2025. This was announced in March 2025. So, DA went up from 53% to 55%. Now, from July 2025, the DA rates will change again. The new rates will depend on the AICPI data from January to June 2025. The final announcement is likely to happen after Rakshabandhan.

DA May Increase by 3% or 4% in July

The AICPI data from January to May 2025 gives a hint about the DA hike. The index was:

  • January: 143.2
  • February: 142.8
  • March: 143.0
  • April: 143.5
  • May: 144.0 (a rise of 0.5 points)

Based on these numbers, the DA score has reached 57.85%, which shows a likely 3% increase. But the June data is not available yet. It will be shared on 30th or 31st July 2025. Only after this, the final DA rate for July 2025 will be confirmed.

The new DA rates will be effective from July 2025. A proposal may be presented in the cabinet meeting around Rakshabandhan or Diwali. Employees and pensioners may also get arrears along with the DA hike.

How Dearness Allowance Is Calculated

There is a fixed formula to calculate DA for central government employees and pensioners under the 7th Pay Commission. The formula is:

DA% = [(Average of last 12 months AICPI-IW – 261.42) ÷ 261.42] × 100

Example:

If the average CPI-IW for the last 12 months is 392.83, then:
DA% = (392.83 – 261.42) ÷ 261.42 × 100 = 50.26%

As per this calculation, the DA comes close to 50.28% of basic pay. So, the government may round it off and increase DA to 50%.