Dearness Allowance Hike: Government to Increase DA by 2% Before 8th Pay Commission

The central government is set to increase the Dearness Allowance (DA) by 2% for its employees before the implementation of the 8th Pay Commission. Initially, it was speculated that the DA hike could range between 3-4%, but recent reports suggest that the increase will be limited to 2%.

Dearness Allowance Hike Before Holi

The DA revision occurs twice a year, in January and July, based on the inflation rate. The expected increase in DA from 53% to 55% will be effective from January 2025. However, the final decision will be made in the cabinet meeting chaired by Prime Minister Narendra Modi. Previously, in October 2024, the government approved a 3% DA hike, increasing it from 50% to 53%.

Impact of DA Hike on Salary

The increase in DA will reflect in the salaries of government employees. For example:

• An employee with a basic salary of Rs 18,000 currently receives Rs 9,540 at 53% DA. With a 2% increase, this amount will rise to Rs 9,900, resulting in an additional Rs 360 per month.

• If the DA increase were 3%, the total DA amount would have been Rs 10,080, increasing the salary by Rs 540 per month.

How is DA Calculated?

The DA and Dearness Relief (DR) rates are determined based on the All India Consumer Price Index (AICPI) over a 12-month period. The government revises DA every January and July but usually announces the hike in March and September.

Formula for DA Calculation:

DA Percentage = ((Average AICPI of last 12 months – 115.76) / 115.76) × 100

8th Pay Commission Implementation

The government has announced the 8th Pay Commission, which will restructure the salaries and pensions of central government employees. The tenure of the 7th Pay Commission ends in December 2025, and the 8th Pay Commission is expected to be implemented in 2026. However, the Terms of Reference (ToR) and committee members for the 8th Pay Commission are yet to be disclosed.

The upcoming changes will significantly impact the salary structure of government employees, making the announcement of the DA hike an important prelude to future revisions.