Ever since the announcement of the 8th Pay Commission by the government in January 2025, discussions have intensified among central government employees and pensioners regarding the increase in salary and pension. It is expected that Dearness Allowance (DA) can be merged with the Basic Salary in the 8th Pay Commission.
Along with this, the structure of various allowances is also likely to increase. One of the most important proposals is to increase the Medical Allowance three times, which will provide great relief to retired employees. Let us discuss all these possible changes and their implementation timeline in detail.
Proposal to increase the medical allowance of pensioners by 3 times
In the 34th SCOVA (Standing Committee of Voluntary Agencies) meeting held in Delhi on 11 March 2025, a very important proposal came up regarding the medical allowance of pensioners. It was suggested in the meeting that the medical allowance of ₹ 1,000 per month currently being given should be increased to ₹ 3,000 per month. In view of rising inflation and medical expenses, pensioners have been demanding an increase in this allowance for a long time.
Now this proposal has been recommended to be included in the ‘Terms of Reference – TOR’ of the 8th Pay Commission. It is believed that this change can come into effect from January 1, 2026. This move will bring great relief to lakhs of pensioners, especially in reducing the burden of rising medical expenses in old age.
HRA and other allowances may also be increased
It was also clarified in the SCOVA meeting that apart from salary, other allowances like House Rent Allowance (HRA), Travel Allowance (TA), Dearness Allowance (DA), and Medical Allowance should also be reviewed.
HRA in metro cities
Employees living in metro cities are likely to get higher HRA, as the cost of living in these cities is quite high.
TA in rural and semi-urban areas
The travel allowance for employees posted in rural and semi-urban areas can be calculated in a new way, so that they get proper compensation.
Abolition of some old allowances
Along with this, the government is also considering eliminating some old and obsolete allowances, so that the structure of allowances can be made more streamlined and effective. This will reduce unnecessary expenses and make the system better.
Will DA be merged with basic pay and the minimum wage increase
In the 7th Pay Commission, the fitment factor was kept at 2.57, on the basis of which the minimum wage was fixed at ₹ 18,000. Now, in the 8th Pay Commission, it is expected that the minimum salary may increase to ₹ 27,000, which will provide a lot of financial help to the lower-level employees. This can be a very big change. If the Dearness Allowance (DA) is merged with the basic salary, the basic salary of the employees will increase significantly, due to which their other allowances and retirement benefits will also increase in the same proportion in the future.
However, the framework and TOR of the commission are yet to be finalized. Usually, it takes 18 to 24 months from the formation of a pay commission to the implementation of its recommendations. In such a situation, the implementation date, which is expected to be 1 January 2026, now seems that this date may also be extended. Employees and pensioners will have to wait for the final announcement, but these potential changes are extremely positive signs for their financial future.