Dearness allowance for central government employees likely to rise to 63% as AICPI-IW stays flat

• Central govt employees' dearness allowance to increase by 5% to 63% in Jan 2026
• Transport allowance will also increase by 5 percent with the DA hike
• No proposal to merge dearness allowance with basic pay at present

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The dearness allowance for the central government employees is likely to be raised by 5 percent, taking the overall hike to 63 percent, as the Ministry of Labour and Employment retained the AICPI-IW index at 148.2 for December 2025.

The All India Consumer Price Index for Industrial Workers is a key input for revising dearness allowance for central government employees and pensioners to safeguard salaries and pensions from the impact of inflation.

“With the Centre keeping the AICPI-IW index unchanged at 148.2, the dearness allowance will be raised by 5 percent. This means the DA will be hiked 63 percent,” said Manjeet Singh Patel, president of the All India NPS Employees Federation.

The revision of dearness allowance is due in January 2026 as part of the biannual cycle. The government had increased DA from 54 percent to 58 percent in July 2025.

Following the routine practice, the Centre will likely implement the hike in DA for central government employees in March-April 2026. Employees can hope to receive their DA hike in April’s salary, which will cover the arrears from January 2026.

How is central government DA calculated?

According to Patel, with December’s AICPI-IW at 148.2, the central government employees will see the hike in DA be raised by 5%, from the current 58 percent to 63 percent.

Here’s the calculation —

DA (%) = [{(Average AICPI-IW of last 12 months × 2.88) − 261.41} / 261.41​] × 100 − Existing DA (%)

148.2 × 2.88 = 426.81

426.81 - 261.41 = 165.4

165.4 ÷ 261.41 = 0.63

0.63 × 100 = 63.00

63-58 = 5% DA

What about the transport allowance hike?

Whenever the Centre implements the dearness allowance, the transport allowance is also raised by the same percentage.

The 7th Pay Commission determined that transport allowance for central government employees depends on their pay level and the category of city where they are posted. Cities are classified into three groups—X, Y and Z—with X-category cities attracting higher transport allowance than Y and Z.

The allowance is paid as a fixed monthly amount, with dearness allowance added to it. In addition, employees at Level 14 and above who are eligible for an official car but choose not to use it receive Rs 15,750 per month, while employees with disabilities are entitled to twice the applicable transport allowance.

Let’s take an example of the central government employee in Pay Level 5 posted in a Y-category city who draws a base transport allowance of Rs 1,800. When the dearness allowance is raised to 63 percent, his transport allowance will increase by Rs 1,134, taking the total to Rs 2,934.

Employee bodies call for merger of DA with basic pay

Several organisations representing government employees have been calling for the merger of dearness allowance with basic pay since the government announced the terms of reference for the 8th Pay Commission in early November.

“Employees are eagerly awaiting immediate relief, and the government should consider merging the existing DA with basic pay. With DA already trailing inflation and gold prices continuing to surge, such a move would offer much-needed support,” said Patel.

That being said, the Centre earlier clarified that there hasn’t been a proposal to merge dearness allowance with the basic pay, as an intermediate relief measure for central government employees.

“No proposal regarding merger of the existing dearness allowance with the basic is under consideration with the government at present,” Pankaj Chaudhary, minister of state in the Ministry of Finance, told Lok Sabha in a written reply dated December 1, 2025.