There is important news for central government employees and pensioners. From January 2025, the Modi government has increased the Dearness Allowance (DA) by 2%. With this, the total DA has gone up from 53% to 55%. Employees will get the benefit of this hike in the April salary, along with arrears in May. The next DA hike will be in July 2025.

The Central Government revises the DA (for employees) and DR (for pensioners) twice a year — in January and July. This revision depends on the half-yearly All India Consumer Price Index (AICPI) data for the periods January to June and July to December. The AICPI data for January and February is out, and the score stands at 142.8. However, the data for March, April, May, and June is still awaited. Only after that will it be clear how much the DA will increase in July 2025.

Will the DA Increase Be Less Than 2% in July 2025?

Last month, the Central Government increased the Dearness Allowance (DA) by only 2%, bringing the total DA to 55%. However, this increase is the smallest in the last 78 months, as DA has generally been increasing by 3-4% in the past. The next DA hike will occur in July 2025 and will depend on the data from January to June 2025.

So far, the AICPI Index was 143.2 in January 2025. In February, the index dropped by 0.4 points to 142.8. Additionally, the CPI-based retail inflation rate reached a 5-year low of 3.34% in March 2025, down from 3.61% in February. If the AICPI index doesn’t rise in the next few months, it’s possible that the DA increase in July 2025 could be less than 2%.

How is Dearness Allowance Calculated?

There is a formula to calculate the Dearness Allowance (DA) for central government employees and pensioners:

7th CPC DA Formula:

DA% = [{12-month average of AICPI-IW (base year 2001=100) for the last 12 months – 261.42} / 261.42] × 100

This formula applies to those whose salary is based on the recommendations of the 7th Pay Commission.

As of now, the 12-month average of the AICPI-IW is 392.83. Using the formula:
DA% = (392.83 – 261.42) / 261.42 × 100 = 50.26%

So, the current DA is about 50% of the basic salary.

Will the 8th Pay Commission Be Implemented from January 2026?

The tenure of the 7th Pay Commission will end on 31st December 2025, meaning the 8th Pay Commission is expected to be implemented from 1st January 2026. Once the 8th Pay Commission is in place, it’s possible that the Dearness Allowance will be added to the basic salary. If the DA is 50% or more, there is a provision to merge it with the new pay scale.

Additionally, the AICPI index from January to June 2026 will decide the DA increase under the 8th Pay Commission. It is estimated that the fitment factor in the 8th Pay Commission could range between 2.28 to 2.86, potentially increasing salaries by 30-40%. This means the minimum basic salary could rise from Rs 18,000 to Rs 51,480.