If you work or retired from central government services, experts predict that soon after their biannual review, the government could increase your Dearness Allowance and Relief payments. They predict it could happen as early as this week!
Many experts anticipate that both Dearness Allowance (DA), applicable to current central government employees, and Dearness Relief (DR), applicable to pensioners effective January 1 2025, will be increased by at least 2%. If this happens, it would mark one of the lowest DA increases since July 2018 when it went from 7% to 9%; some experts anticipate an even larger hike between 3-4%.
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DA Hike in March 2025: How Much Can Central Govt Employees Expect?
An increase in Dearness Allowance (DA) results in an immediate rise in gross salary and pension payouts, currently representing 53% of an individual’s basic pay. If the estimated 2% DA hike were implemented immediately, an employee with a basic pay of Rs 20,000 could experience an estimated Rs 400 increase in monthly DA payments, leading to an increase in overall earnings as well.
Last October 2024 saw an announcement for an increase in District Administration expenses from 50% to 53% effective retroactively from July. This brought District Administration fees up from their former level of 53%.
Where Will Dearness Allowance Increase in March 2025? Dearness Allowance (DA) plays a pivotal role in determining the take-home salary of government employees and pensioners alike. Calculated as a cost-of-living adjustment, DA serves to counteract inflationary effects by offering cost-of-living adjustments on basic pay to help pensioners and salaried employees manage inflation more easily.
Shryeshth R. Sharma, Partner, SKV Law Offices explains, “The Central Government reviews dearness allowance (DA) twice each year: once in January and again in July. The dearness allowance rate is determined using data from All-India Consumer Price Index for Industrial Workers (AICPI-IW), published by Labor Bureau. To decide any necessary hike in DA payments after reviewing AICPI-IW data from previous six months.”
DA Hike Expected to Reach 56-57% in March 2025 Amid Rising Inflation
But some experts expect the rise in DA could exceed two per cent, since RBI Governor Raghuram Rajan’s recent address highlighted how Consumer Price Index inflation for this fiscal year is estimated at 4.8%.
Utsav Trivedi, Partner at TAS Law, anticipates an anticipated increase of 3-4% to the distribution allowance (DA). He expects this will result in take-home salaries rising directly for government employees as well as pension increases for retirees.
“For instance, an entry-level employee with a basic salary of Rs 18,000 could experience an increase of between Rs 540 to 720 per month and senior employees earning a base salary of Rs 50000 could receive between Rs 1,500 to 2,00″. These increases will help mitigate inflationary pressures on household expenses,” according to him.
In January 2019, PM Modi approved the formation of the 8th Pay Commission – marking an important step toward revising pay scales for central government employees and pensioners beginning January 1st 2026. This change will become effective from this date forward.
Fitment factor, the mainstay of every pay commission, determines the level of salary and pension increment. Multiplied by their current basic pay, this number determines their new basic pay amount.
Will the Fitment Factor Increase Under The 8th Pay Commission?
Suma RV, Partner at Kochhar and Co. has estimated an expected fitment factor between 2.65-3 from January 1, 2026 under the 8th Pay Commission that may increase salaries between 25%-30.
At present, according to the 7th Pay Commission’s recommendation, the current fitment factor stands at 2.57; according to Sharma’s estimates, its replacement could range between 2.28 and 2.86 and could increase minimum basic pay from Rs 18000 up to as much as Rs 51480, providing government employees a significant salary hike.
According to Alay Razvi, Managing Partner at Accord Juris, “it is expected that the 8th Pay Commission will recommend an increase of fitment factors from 2.57 in the previous Commission to 2.85 for this one resulting in at least 20-30% increases to basic salaries with implementation at 2.88 taking the minimum basic pay up from Rs 18000/- up to around Rs 50k thus bringing huge relief for millions of employees and pensioners”.
Will Deferred Annuity Pay (DA) be combined into basic pay and reset to zero as part of the 8th Pay Commission?
Reportedly, with the 8th Pay Commission coming into force in January 2026, it may become common practice to switch DA back from O and merge it back in with basic salary, though biannual adjustments will likely continue.
Experts anticipate that the proposed panel for the 8th pay commission will present its recommendations at the end of this financial year, anticipating salary increases for employees as well as possible merger of DA with basic salary.
“These changes will be implemented through the Central Civil Services (Revised Pay) Rules 2025, which will also take into account an increase in pension and retirement benefits (such as EPF and gratuity benefits).”
