Cabinet raises DA, DR for central staff and pensioners by 3 points to 63% ahead of Diwali

Nagpur: Central government employees and pensioners have received good news ahead of Diwali. The Union Cabinet on Wednesday approved a 3 percentage point increase in dearness allowance (DA) and dearness relief (DR). The allowance has risen from 60 per cent of basic pay to 63 per cent.

The increase comes more than a week before Diwali and will be effective from July 1 this year. About 48 lakh central government employees and 68 lakh pensioners will benefit. The increase follows the accepted formula based on the recommendations of the Seventh Pay Commission.

Dearness allowance is a basic allowance meant to help government employees and pensioners, protecting their fixed income against rising prices. It is fixed as a percentage of basic pay and is revised periodically on the basis of set price indices, so that employees' purchasing power is maintained.

The allowance is revised twice a year, usually in January and July. It is calculated on the basis of the Consumer Price Index for Industrial Workers (CPI-IW), which the Labour Bureau under the Labour Ministry releases every month.

A letter from an employees' organisation recently detailed the rise in DA over the past few years. According to the letter, central employees' DA was 46 per cent in July 2023. It rose to 50 per cent in January 2024, 53 per cent in July 2024, 55 per cent in January 2025, 58 per cent in July 2025 and 60 per cent in January 2026. This is a rise of 14 percentage points between July 2023 and January 2026.

The Seventh Pay Commission is currently in force. Under its rules, the DA rate effective from July 1, 2026 is calculated from the average of the All India Consumer Price Index for Industrial Workers (AICPI-IW) over the previous 12 months, from July 2025 to June 2026.

The formula for calculating central employees' DA is: DA (%) = [(12-month average AICPI-IW x 2.88) - 261.33] / 261.33 x 100.

As the increase is effective from July 1, 2026, central employees and pensioners will receive higher pay this month along with arrears of DA and DR.