There is good news for Central Government employees. While everyone is waiting for the implementation of the 8th Pay Commission, another Dearness Allowance (DA) hike is expected under the 7th Pay Commission. The DA may increase by 3% to 4% in July 2025. This means the DA could rise to 58% or even 59%.
DA Increases Twice a Year
The government increases Dearness Allowance (DA) two times every year. The first increase, for January, is usually announced in February or March. No matter when the announcement is made, it is always considered effective from January 1.
The second DA increase is for July and is usually announced in September or October. It is considered effective from July 1, even if the announcement comes later. Employees receive the pending amount (arrears) along with their salary. This increase helps employees cope with inflation.
How is DA Decided?
DA is calculated based on the Consumer Price Index (CPI-IW) for Industrial Workers. The Labour Ministry releases this data every month.
According to the 7th Pay Commission formula, DA is calculated as:
DA (%) = [(12-month average CPI-IW – 261.42) ÷ 261.42] × 100
Here, 261.42 is the base CPI-IW for the year 2016.
DA Also Depends on Inflation Rates
The final CPI-IW average is not yet available till May 2025. But a drop has been seen in CPI-AL and CPI-RL, which track inflation for agricultural and rural labourers.
CPI-AL: 2.84%
CPI-RL: 2.97%
These indexes are not directly used to calculate DA but help show the inflation trend.
How Much Can DA Increase?
If the CPI-IW stays stable or goes up slightly by June, the government may increase DA by 3% to 4%. This means the total DA could go up to 58% or 59%.
The final DA hike will be announced after CPI-IW data is released in late July, followed by cabinet approval around September or October. After that, employees will get the revised DA with arrears from July 1, 2025.
How Much Will the Salary Increase?
If DA increases by 3%, an employee with a basic salary of Rs 18,000 will get an extra Rs 540.
Currently, with 55% DA, the employee receives Rs 9,990 as DA on a basis of Rs 18,000. If DA rises to 58%, this amount will increase to Rs 10,440.
This will provide much-needed relief to lakhs of central employees and pensioners, especially while they wait for the 8th Pay Commission to be announced.