Central government employees and pensioners are set to receive a significant boost in their earnings as the Union Cabinet has approved a 3 percent hike in Dearness Allowance (DA). This decision was made on October 1, ahead of the festive season, and will take effect from July 1, 2026. This marks the second DA increase this year, following a 2 percent hike approved in March, which raised the DA from 53 percent to 55 percent of the basic pay. With the new increase, the DA will now reach 58 percent.

The DA is an essential component of government compensation, designed to help employees cope with inflation. It is calculated as a percentage of the basic salary and is revised biannually, typically in January and July. The latest increase is expected to provide additional financial support to approximately 1.15 crore central government employees and pensioners.

For employees earning a minimum basic salary of Rs 18,000, the 3 percent hike will add Rs 540 to their monthly earnings, bringing their total to Rs 28,440. Pensioners receiving a minimum pension of Rs 9,000 will see an increase of Rs 270, raising their total pension to Rs 14,220.

The Confederation of Central Government Employees and Workers (CCGEW) had previously expressed concerns about the delay in the announcement, as the usual schedule for such notifications is late September, with disbursement of arrears in early October. The government had implemented a 2 percent increase in DA/DR in March 2025, which took effect from January 1, 2025.

This DA hike is particularly significant as it is the last scheduled revision under the 7th Pay Commission, which will conclude its term on December 31, 2025. Discussions regarding the formation of the 8th Pay Commission are ongoing, with employee organizations urging the government to expedite the process. The DA increase is expected to provide some relief to employees and pensioners amid rising living costs, while attention now turns to the future of the pay commission system.