The Central Government revises the rates of Dearness Allowance and Dearness Relief of employees and pensioners twice a year, in January and July. This revision depends on the half-yearly data of the All India Consumer Price Index (AICPI). DA was increased by 2% from January 2025, after which the rate of DA has increased from 53% to 55%. Now all eyes are on the next DA increase in July 2025.
How much will DA increase in July 2025
The next dearness allowance will increase from July 2025, which will depend on the AICPI index scores from January to June 2025. The figures for January and February are now out, after which the score has reached 143.0. However, the figures for March, April, May, and June are yet to come, after which it will be decided how much DA will increase from July 2025. All employees and pensioners are eagerly waiting for this important announcement.
Will the DA increase be less than 3% in July 2025 as well
Actually, in March, the Modi government at the Center had increased dearness allowance and relief by 2%, after which DA has become 55%. However, this increase is the lowest in 78 months, as till now DA has been increasing by 3 to 4%. Now the next DA will increase from July 2025 which will depend on the figures from January to June 2025. Will the increase be less this time too? This is a big question whose answer will be found in the AICPI figures of the coming months.
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 has come back to 143.0 with a gain of 2 points!
CPI based retail inflation reached a 5-year low of 3.34% in March 2025, while it was 3.61% in February. If this trend continues and AICPI points rise in the next 3 months, then 3% can be expected! But if the points fall, then next time we may see a DA increase of less than 2%. It will depend on the economic scenario.
How is the dearness allowance calculated
There is a formula to calculate dearness allowance for central government employees and pensioners. This 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 those central government employees and pensioners1 who get salary based on the recommendations of the Seventh Pay Commission.
For example:
DA% = (392.83-261.42)/261.42×100 = 50.26
The average CPI-IW for the previous last 12 months is around 392.83. As per the formula, DA is coming to 50.28 percent of the basic salary. Therefore, the central government can also increase the dearness allowance by up to the 50%. This complex calculation is important for employees.
Will the new 8th Pay Commission be implemented soon
The term of the 7th Pay Commission is ending on December 31, 2025, so there is a possibility that the 8th Pay Commission may be implemented from January 1, 2026. There are reports that the dearness allowance may be added to the basic salary when the 8th Pay Commission is implemented. If the dearness allowance is 50% or more, there is a provision to merge it with the new pay commission. This can bring a big change in the salary of the employees.
Apart from all this, the amount of the dearness allowance (DA) will be always decided by the AICPI index from January month to June 2026. It is estimated that the fitment factor in the 8th Pay Commission can be fixed between 2.28 to 2.86, which can increase the salary by 30-40%. That is, the minimum basic salary can increase from ₹ 18,000 to ₹ 51,480. This is a bright prospect for employees in the future.