The central government is expected to announce an increase in Dearness Allowance (DA) and Dearness Relief (DR) next week.
This decision will benefit over 1.2 crore government employees and pensioners. Reports suggest that the government may officially announce the hike before Holi.
DA is revised twice a year, in January and July, but official announcements take some time.
Typically, the January hike is declared before Holi, while the July hike is announced around Diwali.
This allowance helps employees manage inflation and maintain their purchasing power.
Expected DA Hike and Calculation
Based on December 2024 figures, the government is likely to increase DA by 3%, taking the total DA and DR to 56%.
However, the final decision will be made by the Union Cabinet, led by the Prime Minister.
How is DA Calculated?
The Dearness Allowance (DA) is determined using the All India Consumer Price Index for Industrial Workers (AICPI-IW).
The calculation method varies for central and public sector employees:
For Central Government Employees:
DA (%) = [(Average AICPI of last 12 months – 115.76) / 115.76] × 100
For Public Sector Employees:
DA (%) = [(Average AICPI of last 3 months – 126.33) / 126.33] × 100
Previous DA Increases and Future Pay Revisions
March 2024: DA was raised from 46% to 50% on March 7, 2024, just before Holi.
October 2024: Another 3% increase took DA to 53%, effective July 1, 2024.
8th Pay Commission and Future Changes
The 8th Pay Commission is expected to be implemented in 2026. During this time, the government may decide whether DA should be merged into the basic salary.
The final recommendations of the 8th Pay Commission are likely to be completed by the end of the financial year 2025-26, with implementation in 2026.
Until then, under the 7th Pay Commission, two DA hikes are expected in 2025, followed by one more in 2026 before the new pay structure takes effect.
