DA Hike Update: 2% or 3%? What central govt employees may gain – Know formula, latest data and more

Dearness allowance latest news

• DA and DR for central govt employees set for semi-annual revision in January
• Current DA stands at 58%, with debate over a 2% or 3% upcoming increase
• 8th Pay Commission recommendations may be influenced by cumulative DA hikes

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Several key money-related changes have come into effect with the start of the new year. From PAN-Aadhaar linking to new income tax return rules, multiple financial policy updates are reshaping how India's system works.

Amid these changes, there is a significant update in store for central government employees. While the timeline for the 8th Pay Commission continues to stretch, dearness allowance (DA) and dearness relief (DR) are due for their scheduled semi-annual revision.

This revision could bring some relief to lakhs of government employees. Although the exact increase in DA and DR will be known only after the December data is released, the November All India Consumer Price Index-Industrial Workers (AICPI-IW) figures indicate a notable rise in both allowances.

Currently, DA stands at 58%. In January last year, DA and DR were increased by 2 percentage points to 55%, followed by a further 3 percentage point hike that took them to the present level of 58%. This has triggered debate over whether the next increase will be 2% or 3%.

How DA and DR are calculated

Dearness allowance (DA) is calculated using the following formula:

DA (%) = [{12-month average of AICPI-IW (base year 2001) - 261.42} ÷ 261.42] × 100

However, the CPI-IW series currently uses 2016 as the base year. To apply the formula, these values must first be converted to the 2001 base by multiplying them by a linking factor of 2.88.

This factor is derived from Labour Bureau data. In August 2020, the CPI-IW stood at 338 under the old base year (2001 = 100) and 117.4 under the new base year (2016 = 100). Dividing 338 by 117.4 gives 2.88, which is used to align the 2016-base index with the 2001 series for DA calculation.

What this means for 8th Pay Commission recommendation?

The 8th Pay Commission has not yet clarified the methodology it will use to determine salary revisions for employees. However, if dearness allowance (DA) is factored into the calculations, the prevailing DA rate is likely to have a direct bearing on the final payouts.

In November 2025, the 8th Pay Commission was granted an 18-month period to submit its recommendations. Until the report is finalised, DA and dearness relief (DR) for employees and pensioners will continue to be revised every six months. These revisions are scheduled for January 2026, July 2026, January 2027, and July 2027.

If the cumulative DA increase across these four revisions adds up to 10%, instead of an expected 8%, it could allow the fitment factor to be set at a higher level. This, in turn, would result in higher salaries and pensions, along with increased arrears for both employees and pensioners.