8th Pay Commission: What happens to your DA hike until the new pay panel comes into effect?

The Union Cabinet’s recent approval of the Terms of Reference (ToR) for the 8th Pay Commission last month has sparked fresh excitement — and plenty of questions — among central government employees. On Monday, Minister of State for Finance Pankaj Chaudhary, responding to questions about when the 8th Pay Commission will be rolled out and how many people it will cover, said the government will decide the implementation date after the recommendations are finalised. He added that the necessary funds will be allocated once the accepted proposals are approved.

The 8th Pay Commission has already been set up, and its Terms of Reference (ToR) were cleared by Prime Minister Narendra Modi on October 28. The Finance Ministry then formally issued the ToR through a resolution on November 3.

Meanwhile, in October, the government also cleared this year’s final dearness allowance (DA) hike, offering some immediate relief against rising prices. But with no confirmed date yet for when the 8th Pay Commission will actually kick in, one question is on everyone’s mind: Will DA hikes continue as usual, or pause until the new pay structure is introduced?

So, what happens to DA until the 8th Pay Commission is implemented?

In simple terms: DA will continue exactly the way it does now. It will still be calculated as a percentage of basic pay and revised twice a year — in January and July — using the current formula.

Once the 8th Pay Commission is implemented, the existing DA will be folded into the revised basic pay, recalibrating your entire salary structure, allowances and retirement benefits. Think of it as hitting a reset button on your pay components.

Ramachandran Krishnamoorthy, Director of Payroll Services at Nexdigm, explains it clearly: “DA will proceed as usual… It will continue to be calculated based on your existing basic pay and revised twice a year, typically in January and July, according to CPI-based inflation data. Employees should still expect DA increases during this period. After the 8th Pay Commission comes into force, the existing DA will likely be merged into the new basic pay, resetting the calculation framework.”

Why does DA matter so much?

Government salaries have evolved over the years. Basic pay, which once made up nearly 65% of total salary, now sits closer to 50%. As a result, allowances — especially DA — play a much bigger role in helping employees keep up with rising living costs. DA acts as a cushion against inflation, ensuring that even as prices increase, your purchasing power doesn’t erode as quickly.

The latest DA hike — a 3% increase announced on 1 October — came just ahead of Diwali, offering timely relief for millions of households.

What to expect when the 8th Pay Commission rolls out

The 7th Pay Commission introduced the now-familiar pay matrix, bringing clarity to increments and career progression. The 8th Pay Commission is expected to build on that foundation with a revised, more modern structure that better reflects today’s economic realities.

If implemented as projected on 1 January 2026, the new pay commission could benefit nearly 50 lakh employees and 65 lakh pensioners, including defence personnel.

In the meantime, DA hikes will continue to bridge the gap, ensuring incomes stay aligned with inflation until the new pay structure arrives.