NEW DELHI: The Union Cabinet on Wednesday approved a 3 percent increase in Dearness Allowance (DA) for central government employees and Dearness Relief (DR) for pensioners, raising the rates from 60 percent to 63 percent of basic pay and pension, respectively. The revision will take effect retrospectively from July 1, 2026.
The decision, announced ahead of Diwali, which will be celebrated on November 8, will benefit approximately 1.17 crore individuals, including 48.54 lakh serving central government employees and 68.71 lakh pensioners.
“The additional financial burden on the government is estimated at Rs 10,016.10 crore annually,” Information & Broadcasting Minister Ashwini Vaishnaw said at the meeting of the Union Cabinet, chaired by Prime Minister Narendra Modi.
With the hike effective from July, beneficiaries will also be entitled to arrears for July, August, September and October. The arrears are expected to be paid along with the October salary, subject to the government’s disbursement schedule, providing employees and pensioners with an additional payout ahead of the festival.
Later in an official statement, the government said the increase was approved by the Union Cabinet, chaired by Prime Minister Narendra Modi, to compensate employees and pensioners for rising prices.
The DA is paid to serving employees, while DR is provided to pensioners. Both are calculated as a percentage of basic pay or pension and are generally revised twice a year, in January and July, based on changes in the All India Consumer Price Index for Industrial Workers (AICPI-IW).
Under the 7th Pay Commission framework, these revisions are intended to help offset the impact of inflation on the purchasing power of government employees and pensioners. DA is taxable, while DR is calculated on the basic pension of eligible retirees.
The previous instalment of DA and DR was revised with effect from January 1, 2026. The latest increase marks the next scheduled adjustment, taking the combined rate to 63 percent.
The next revision is expected to take effect from January 2027, although the final decision will depend on the government's assessment of inflation data and the applicable procedure.
The latest move comes amid continuing price pressures. Consumer price inflation stood at 4.82 percent in August, above the Reserve Bank of India’s medium-term target of 4 percent. The RBI has projected average inflation of 5.2 percent for the full year, underscoring the importance of periodic DA and DR adjustments in helping government employees and pensioners manage rising living costs.