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The Central Government has recently increased the Dearness Allowance (DA) by 2 percent. After this decision, now central employees and pensioners will start getting DA of 60% of their basic salary. This step of the government is being seen as a big relief for the employees amid rising inflation. This increase will directly benefit about 65 lakh pensioners (DR), including about 50 lakh central employees and defense personnel. Public sector (PSU) employees, bank employees and their pensioners are also included in its scope.

Revenge happens twice a year

To reduce the impact of inflation on the pockets of employees, DA is changed twice a year on the basis of ‘All India Consumer Price Index’ (AICPI) data. Usually its announcements are made in March and October, which are considered to be applicable from January and July respectively.

How is your dearness allowance decided?

As per the recommendations of the 7th Pay Commission, DA is calculated on the basis of the average of AICPI of the last 12 months. For this the following formula is used:

For Central Employees: DA%={AICPI average of last 12 months (Base Year 2001 = 100)} – 261.42}÷{261.42}×1

For Public Sector (PSU) Employees: DA%={AICPI average of last 3 months (Base Year 2001 = 100)} – 126.33}÷{126.33}×1

This is how the figure of 60% was arrived at: The recent increase of 2% has been decided under this formula. According to calculations, this figure was 60.39%, which was rounded off (to the nearest number) and fixed at 60%. Earlier, employees were getting 58% DA.

Brainstorming continues on 8th Pay Commission, when will the recommendations be implemented?

Meanwhile, discussions are intensifying regarding the formation of the 8th Pay Commission (8th CPC). The Commission is currently holding frequent meetings with employee organizations, unions and other stakeholders. In these meetings, suggestions are being taken regarding improvements in salary structure, allowances and pension. The decisions of this commission, which is formed every 10 years, will have a big impact on lakhs of employees including railways and defence.

According to the plan, this panel constituted on November 3, 2025, has to submit its final report in about 18 months. In this context, it is expected that the commission will submit its recommendations to the government by February 2027. However, if we look at the past trend, even after the recommendations are made, it may take 2 to 3 years for it to be fully implemented at the ground level. This means that its full impact on the salaries of employees can be seen by 2029 or 2030.

Will DA increase again this year?

Inflation figures in the country are once again scaring. Due to the rise in prices of fuel, crude oil and manufactured products, wholesale inflation increased to 9.68% in May, which was 8.26% in April. At the same time, in May, retail inflation was recorded at 3.93% and food inflation was recorded at 4.78%. The rising prices of milk, vegetables, electricity and fuel (CNG-Diesel) have ruined the household budget of middle class and working people. In such a situation, there are speculations that to provide relief from rising inflation, the government may announce another DA hike around July or September this year.

Disclaimer: This article is only for the purpose of sharing information. The views and estimates given above are of analysts and broking companies, it has nothing to do with Latest. Before taking any kind of investment or financial decision, definitely take advice from experts.

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