DA Hike: 3% or 5%, how much will the govt increase DA in January 2026? Know the full calculation

DA Hike: The Ministry of Labor and Employment has released the All India Price Index for Industrial Workers (AICPI-IW) for November 2025. This index stood at 148.2. This figure serves as the basis for determining dearness allowance (DA) for central government employees and pensioners, so that inflation does not erode the real value of their salary or pension.

Why is DA revision in January 2026 important?

The next revision of dearness allowance is scheduled for January 2026. This is a normal process that occurs every six months. Previously, in July 2025, the government increased the DA from 54 percent to 58 percent.

Now, employee unions believe that the upcoming revision could see a 3 to 5 percent increase in DA, provided the AICPI-IW for December 2025 remains around 147 to 148.

What are employee organizations anticipating?

Manjeet Singh Patel, President of All India NPS Employees Federation, says that if AICPI-IW 147 of December 2025 is considered, then there will be an increase of about 3 percent in DA for central government employees.

According to him, if the AICPI-IW for December remains around the November 2025 level i.e. 148.2, then an increase of up to 5 percent in DA is possible.

What is the formula for calculating DA?

Patel explained the official formula for calculating dearness allowance with examples:

DA (%) = [{(Last 12 months average AICPI-IW × 2.88) − 261.41} / 261.41] × 100 − Current DA (%)

Example 1: If the AICPI-IW is 148.2, the calculation for dearness allowance is as follows: Multiplying 148.2 by 2.88 gives 426.81. Subtracting 261.41 from this gives 165.4.

Dividing this by 261.41 gives 0.63, which, when multiplied by 100, gives a total DA of 63 percent. After subtracting the current 58 percent DA, this represents an increase of approximately 5 percent.

Another example: If the AICPI-IW is 147, multiplying 147 by 2.88 gives 423.36. Subtracting 261.41 from this gives 161.95.

Dividing this by 261.41 gives 0.61, which when multiplied by 100 gives a total DA of approximately 61 percent. In this situation, after reducing the current DA of 58 percent, the dearness allowance could increase by approximately 3 percent.

How much will the DA be, how much will the salary increase?

If DA increases by 3 to 5 percent, the direct benefit will be reflected in salary. For example, on a basic salary of Rs 50,000, the current 58 percent DA amounts to approximately Rs 29,000. If DA increases to 61 percent, it will increase to approximately Rs 30,500, meaning approximately Rs 1,500 more per month.

If the DA reaches 63 percent, the dearness allowance on this basic salary will be approximately Rs 31,500. This means an increase of approximately Rs 2,500 per month compared to the current DA. Overall, this increase in DA will have a clear impact on employees’ income.

When will the government announce the increase in DA?

All these calculations are based on estimates and are for illustrative purposes only. The actual DA increase for January 2026 will be clear only when the Ministry of Labor releases the AICPI-IW data for December 2025. Usually, the Central Government announces the DA to be implemented from January in March or April.

What to expect from the 8th Pay Commission

At present, there has been no change in the salary of central government employees, whereas the tenure of the 7th Central Pay Commission has ended on 31 December 2025. After the 8th Central Pay Commission is constituted, it will submit its recommendations on the fitment factor within approximately 18 months, beginning in November 2025. This fitment factor will determine the next basic salary increase for employees.

Once the fitment factor is implemented, dearness allowance will be reset to zero and merged into basic pay. However, Patel has previously suggested that instead of eliminating DA altogether, a method should be adopted that maintains employees’ purchasing power in times of high inflation.