DA Hike News: Govt Announces 3% DA Increase For Employees & Pensioners, To Be Effective From July 2025 | Economy News

3% DA Hike: I&B Minister Ashwini Vaishnaw says the decision will have a financial implication of Rs 10,084 crore.

DA Hike July 2025: The Union Cabinet, led by Prime Minister Narendra Modi, on Wednesday approved a 3% DA hike for central government employees and pensioners, in a Diwali bonanza for employees and pensioners. Information & Broadcasting Minister Ashwini Vaishnaw informed this during a Cabinet briefing on October 1.

After the 3% hike, the DA will increase to 58%.

Announcing the Cabinet decision on Wednesday, Vaishnaw said, “The DA hike will have a financial implication of Rs 10,084 crore.”

The increase in dearness allowance, the proposal for which was taken up by the Union Cabinet today, will become effective from July 2025.

This hike will benefit over 1.2 crore employees and pensioners in the country, giving them extra money to spend during the ongoing festival season.

Currently, central government employees receive DA at 55% of their basic pay.

The DA hike is announced twice a year in February-March and September-October, with retrospective effect from January and July each year, respectively. It helps employees offset the impact of inflation.

7th Pay Commission DA Hike: How Much Will Salary Increase?

On a 3% DA hike, the salary of the entry-level central government employee, who has a basic salary of around Rs 18,000 per month, will increase nearly Rs 540 per month, effective from July 1, 2025.

If somebody’s salary is Rs 30,000 per month and has Rs 18,000 as the basic pay, he or she now gets Rs 9,900 as dearness allowance, which is 55 per cent of the basic pay. However, after the expected 3 per cent hike, the employee will get Rs 10,440 per month, which is Rs 540 higher.

How Is DA Hike Calculated?

The hike in dearness allowance (DA) is calculated based on the Consumer Price Index for Industrial Workers (CPI-IW), which is released monthly by the Labour Bureau. The government calculates the DA hike by averaging CPI-IW data for the preceding 12 months, and applying a specific formula under the 7th Pay Commission:

DA (%) = [(12-month average CPI-IW – 261.42) ÷ 261.42] × 100.

The figure 261.42 is the base CPI-IW average (2016 base year) set under the 7th Pay Commission.

When Will The 8th Pay Commission Be Formed?

Though the 8th Pay Commission was announced in January 2025. The government has yet to define the Terms of Reference (ToR) or appoint members to the new commission. According to a report by Kotak Institutional Equities, the 8th CPC is unlikely to be implemented before late 2026 or early 2027 as the 8th CPC ToR and members are yet to be announced.

The 6th and 7th CPCs took roughly 1.5 years to prepare their reports after being set up, followed by a 3-9 month implementation window after the Cabinet approval.

The brokerage firm also said a fitment factor of 1.8 might be adopted, and the minimum pay level is likely to increase from Rs 18,000 to Rs 30,000 per month.

The fitment factor is a multiplier used to revise the basic salary of central government employees based on recommendations by a Pay Commission; it adjusts the existing pay structure to arrive at the new pay levels.