DA Hike: Amidst the hustle and bustle of the budget session, great news has arrived for over 10 million central government employees and pensioners. The path for Dearness Allowance (DA) payouts from January 2026, the first half of 2026, is now completely clear. The December 2025 AICPI index data released by the Ministry of Labor confirms a significant increase in employee salaries.
To combat inflation, the government may increase the DA by a significant 5 percent, taking the total DA from 58% to 63%. This latest update, dated January 31, 2026, brings relief to millions of families who have been waiting for a pay raise during this period of inflation.
AICPI Index
The amount of dearness allowance increase is not a mere guess but depends on concrete data. The most important metric for this is the All India Consumer Price Index (AICPI-IW). The Ministry of Labor and Employment has released the latest figures for December 2025. The index remained stable at 148.2 points in December. It’s worth noting that the index remained at this level in November 2025 as well.
Experts believe that the index’s stability at this level bodes well for employees. This stability means that, based on the average of the past 12 months, the government is now in a position to increase the dearness allowance by the maximum. Manjeet Singh Patel, President of the All India NPS Employees Federation, also confirmed that a 5% increase is highly likely based on these figures.
Will the dearness allowance be 63%
The central government reviews the dearness allowance twice a year, in January and July. Last year, in July 2025, the government increased the DA from 55% to 58%. Now, the data released for January 2026 indicates a significant jump of 5%.
Current rate: 58%
Potential increase: 5%
New rate: 63%
If DA increases to 63%, a Level-1 employee (basic salary ₹18,000) will see a direct increase of approximately ₹900 in their monthly salary. Meanwhile, the salary increase for higher-ranking officials will be in the thousands. This increase is not only for working employees, but millions of pensioners will also benefit directly from it in the form of dearness relief (DR).
How is your salary determined
Dearness allowance is calculated using a scientific formula based on the Consumer Price Index for Industrial Workers. This percentage is calculated using the average AICPI-IW for the last 12 months.
DA calculation formula: DA % = [ {(Last 12 months average AICPI-I * 2.88) – 261.41}/261.41] * 100
The government announces the salary increase based on the figure obtained after this complex calculation. This formula ensures that employees’ purchasing power does not decrease due to inflation.
When will the formal announcement be made
The figures have been released, but now everyone is waiting for the Cabinet’s formal approval. Typically, the DA, which will be implemented in January, is announced in March (around Holi). Since this increase will be considered effective from January 1, 2026, the arrears from previous months will also be added to the salary of employees in March or April. Such positive news during the budget session is expected to boost employee morale.