Centre may announce 3% DA hike for 1.2 cr employees, pensioners in October

In a major festive season relief, over 1.2 crore central government employees and pensioners are set to benefit from a 3% hike in dearness allowance (DA) and dearness relief (DR). The Centre is likely to make the announcement in the first week of October, just ahead of Diwali.

With this revision, DA for employees will rise from 55% to 58%, applicable retrospectively from July 2025. Employees and pensioners will also receive arrears for three months, which are expected to be paid along with the October salary, a report in the Financial Express stated.

DA hikes in 2025

The government revises DA twice annually—once before Holi for the January-June period and again before Diwali for July-December. Last year, the Central government had announced the hike on October 16, 2024, around two weeks before the festival. This year, Diwali falls on October 20-21, and the timing of the announcement is being seen as a festive gift to central staff.

How DA is calculated

DA is determined under the 7th Pay Commission using the Consumer Price Index for Industrial Workers (CPI-IW). The formula takes the 12-month average of CPI-IW data. For July 2024 to June 2025, the average CPI-IW stood at 143.6, which translates to a DA rate of 58%. This means central government employees will see their DA climb by three percentage points for the July-December 2025 cycle.

Impact on salaries and pensions

If an employee’s basic salary is Rs 50,000, then under the old DA rate of 55%, the allowance came to Rs 27,500. With the new DA of 58%, it will rise to Rs 29,000. That means the employee will now take home Rs 1,500 extra every month. Similarly, for a pensioner with a basic pension of ₹30,000, the DR will increase from Rs 16,500 (55%) to Rs 17,400 (58%), giving them an additional Rs 900 per month.

While individual gains vary based on salary or pension levels, the hike collectively adds significant disposable income across millions of households.

Last hike under 7th Pay Commission

This revision is also noteworthy as it will be the final DA hike under the 7th Pay Commission, which expires on December 31, 2025. The government has already announced the 8th Pay Commission in January 2025, but its Terms of Reference (ToR), chairman, and members are yet to be finalized. Implementation of its recommendations is expected only by late 2027 or early 2028.

Rising CPI-IW Data

The Labour Bureau recently released the All-India CPI-IW for July 2025, which rose by 1.5 points to 146.5. This marked a sharper increase than June’s 0.69% rise. However, the July data will not impact the upcoming DA hike, which is based on averages up to June 2025. Instead, it will play a role in calculating the next DA revision due in January 2026.

8th Pay Commission

Economists note that while the immediate DA hike provides short-term relief, it also sets the stage for bigger changes under the 8th Pay Commission. Importantly, once the new pay commission comes into effect, DA will reset to zero and build up again with inflation movements.

For now, the October hike will bring much-needed festive cheer to central government employees and pensioners, easing household budgets amid rising costs.