New Delhi, Oct 1 The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday approved the release of an additional instalment of Dearness Allowance (DA) to Central government employees and Dearness Relief (DR) to pensioners with effect from July 1, 2025, representing an increase of 3 per cent over the existing rate of 55 per cent of the basic pay/pension, to compensate them against the price rise.
The combined impact on the exchequer on account of an increase in both the DA and the DR would be Rs 10,083.96 crore per annum. This will benefit about 49.19 lakh Central government employees and 68.72 lakh pensioners, according to an official statement.
This increase is in accordance with the accepted formula, which is based on the recommendations of the 7th Central Pay Commission, the statement said.
The DA and DR for Central Government staff and pensioners, respectively, have now gone up to 58 per cent of basic pay and pension from 55 per cent earlier. The hike will take effect retrospectively from July 1, 2025. Arrears for July, August, and September will be paid along with the October salary, just before Diwali.
The increase covers all Central government employees under the 7th Pay Commission, as well as pensioners and family pensioners. For instance, an employee with a basic salary of Rs 30,000 will receive an additional Rs 900 per month, while a person earning Rs 40,000 will get Rs 1,200 more. Over three months, the arrears will total Rs 2,700 to Rs 3,600, coming as a package for festive celebrations.
The DA and the DR are revised twice a year, in January and July, based on inflation trends measured by the All India Consumer Price Index for Industrial Workers (CPI-IW). While announcements often come later, arrears compensate for the delay. This revision is expected to be the last under the 7th Pay Commission, with the 8th Pay Commission likely to take effect in January 2026.
The revision in DA and DR was on the cards as one of the two biannual hikes in the two allowances is usually announced in March, while the other is announced in October ahead of Diwali.
The last hike in the DA to Central government employees and DR to pensioners was announced in March this year with retrospective effect from January 1, 2025, representing an increase of 2 per cent to 55 per cent of the basic pay, to compensate them for the price rise.
The combined impact on the exchequer on account of an increase in both the DA and the DR was Rs 6,614.04 crore per annum.
The 2 per cent increase came after a hike of 3 per cent in October last year, when the DA was increased to 53 per cent of the basic pay.
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