‘Diwali gift’: Centre approves 3% DA hike for 4.8 million government employees

The Union Cabinet increased dearness allowance for central government employees from 60% to 63% of basic salary. It also raised dearness relief for central government pensioners by three percentage points. Both changes begin from July 1, 2026. The aim is to adjust payments as prices rise and protect their real value.

About 4.85 million employees receive the higher DA. Around 6.87 million pensioners receive the higher DR. The increase means an employee’s DA component becomes 63% of basic salary instead of 60%. For example, with a basic salary of ₹40,000, the DA component rises from ₹24,000 to ₹25,200 monthly, before other pay elements.

Information and broadcasting minister Ashwini Vaishnaw called the increase a “Diwali gift.” The combined annual financial impact on the exchequer is ₹10,016.10 crore. DA and DR are generally revised twice a year, often retrospectively from January and July, following the accepted formula linked to the 7th Central Pay Commission recommendations.

Dearness allowance, or DA, is an additional payment for central government employees. It is expressed as a percentage of their basic salary. Its purpose is to reduce the effect of inflation on employees’ purchasing power. Dearness relief, or DR, serves a similar purpose for central government pensioners. It helps their pension retain value as prices increase.

The latest decision raises DA from 60% to 63% for about 4.85 million central government employees. DR rises by the same three percentage points for about 6.87 million pensioners. If an employee has a ₹40,000 basic salary, DA changes from ₹24,000 to ₹25,200 per month. The calculation applies to basic salary, not necessarily the employee’s entire pay package.

The allowance is currently based on the Consumer Price Index for Industrial Workers. Officials said the increase broadly follows the accepted formula recommended by the 7th Central Pay Commission. DA and DR are generally revised twice each year, commonly with retrospective effect from January and July.

The approved increase reaches two large groups. About 4.85 million central government employees will receive higher dearness allowance. Around 6.87 million central government pensioners will receive higher dearness relief. The policy therefore affects both people currently working for the Central government and people receiving retirement benefits.

The employee group gets DA raised from 60% to 63% of basic salary. Pensioners receive a matching three-percentage-point rise in DR. For scale, adding the two figures gives approximately 11.72 million beneficiaries, although the article presents the employee and pensioner totals separately. Their payments are adjusted because inflation can reduce what fixed salaries and pensions can buy.

The Cabinet’s decision carries a combined annual financial impact of ₹10,016.10 crore. Information and broadcasting minister Ashwini Vaishnaw described the increase as a “Diwali gift.” The payment takes effect from July 1, 2026, following the usual pattern of DA and DR revisions twice annually.

Moving DA from 60% to 63% means the allowance becomes three percentage points larger relative to basic salary. It does not mean every part of an employee’s pay rises by 3%. The increase applies to the DA component calculated from basic salary, while other pay elements are separate.

For example, an employee with a basic salary of ₹40,000 previously received DA of ₹24,000 monthly at 60%. At 63%, the DA becomes ₹25,200. The monthly increase is therefore ₹1,200, or 3% of the ₹40,000 basic salary. Total monthly pay rises by that amount if all other components remain unchanged.

The article states that DA is always expressed as a percentage of basic salary. The decision follows an accepted formula linked to the 7th Central Pay Commission’s recommendations and the Consumer Price Index for Industrial Workers. The exact total pay change varies with each employee’s basic salary and other payment components.

The increase starts on July 1, 2026 because DA and DR are generally revised twice annually. The article notes that these revisions often take effect retrospectively from January and July. This means approval can come after the effective date while the payment calculation still begins from that earlier date.

The previous increase illustrates the process. It was announced on April 18, 2026, but took effect from January 1, 2026. That earlier decision raised both DA and DR by two percentage points, from 58% to 60%. Employees and pensioners therefore received the revised rate for the months covered by the retrospective effective date.

The current decision follows the same pattern. Although the Cabinet approved it on Wednesday, the three-percentage-point increase applies from July 1, 2026. The government’s annual financial impact is ₹10,016.10 crore. The article does not specify when arrears will be paid, only that the revised rate is effective from July 1.

The Consumer Price Index for Industrial Workers, or CPI-IW, tracks price changes relevant to industrial workers. The article says DA is currently based on this index. It therefore provides the inflation-related input for deciding whether the allowance should rise. The same adjustment supports the corresponding increase in pensioners’ DR.

The mechanism connects changing prices with a percentage of basic salary or pension. When the accepted formula, based on the 7th Central Pay Commission’s recommendations, indicates that inflation has reduced purchasing power, DA and DR can be revised. In this decision, both rise by three percentage points. Employees’ DA moves from 60% to 63%.

The article does not provide the CPI-IW reading or a month-by-month calculation. It does state that officials consider the increase broadly consistent with the accepted formula. DA and DR are generally revised twice a year, often with effect from January and July. The index-based system is intended to keep payments aligned with inflation rather than leave them unchanged.

A salary or pension can remain unchanged in rupee terms while everyday prices rise. When that happens, the same amount buys less than before. The article explains that DA protects central government employees’ basic pay from losing real value because of inflation. DR performs the comparable role for pensioners.

The protection works through an additional percentage payment. DA is calculated as a percentage of basic salary, and the current basis is the Consumer Price Index for Industrial Workers. For example, raising DA from 60% to 63% gives an employee with ₹40,000 basic salary an extra ₹1,200 monthly. The payment does not remove inflation, but it helps offset its effect.

The Cabinet’s latest decision raises DA and DR by three percentage points from July 1, 2026. The increase follows the accepted formula linked to the 7th Central Pay Commission. Since revisions generally happen twice a year, future adjustments can continue responding to changes in living costs, although the article gives no future rate.