The central government is set to announce the first Dearness Allowance (DA) and Dearness Relief (DR) revision for 2026 before the Holi festival in March.
DA is revised twice a year – in March for January-June, and around Diwali for July-December.
DA helps central government employees and pensioners cope with rising inflation and is calculated using the All-India Consumer Price Index for Industrial Workers (AICPI-IW).
How DA Is Calculated
The formula used for DA calculation is:
DA% = (Average AICPI(12 months) – 261.42) ÷ 261.42 × 100
261.42 is the base index from the 7th Pay Commission.
For the January 2026 DA, the government will use AICPI-IW data from January 2025 to December 2025.
The latest AICPI-IW figures for November 2025 show a rise of 0.5 points, bringing the index to 148.2.
December’s data, expected next month, will finalize the DA hike.
If the index rises by another 0.5 points in December to 148.7, the average CPI for the year will stand at 145.58.
Plugging this into the formula gives a DA of 60.34%, which is rounded off to 60%.
Currently, DA is 58% (from July 2025), so the expected increase from January 2026 is 2 percentage points.
Why Only 2% Despite Inflation?
Even though inflation is rising, the AICPI-IW increase is not steep enough to push DA into the next higher band.
This structural and mathematical limitation means that, despite rising costs, DA will go up by only 2% in January 2026, rather than 3% or more.
What This Means for Employees
This would be the lowest DA hike in seven years, matching January 2025’s 2% increase.
Most previous hikes have been 3% or higher when inflation was stronger.
To put it in numbers:
Basic pay: Rs 30,000
Current DA at 58%: Rs 17,400
New DA at 60%: Rs 18,000
Monthly increase: Rs 600 before tax
While helpful, this is a modest relief, especially for households facing rising expenses.
Looking Ahead: 8th Pay Commission
The 7th Pay Commission’s 10-year term ended on December 31, 2025, with DA at 58%.
The January-June 2026 hike is the first outside the 7th Pay Commission.
Salary and pension revisions under the 8th Pay Commission are still 18-24 months away.
Therefore, the next four DA hikes will be crucial for over 1 crore employees and pensioners, as DA will eventually merge into the basic pay once the 8th Pay Commission’s recommendations take effect.
