Dearness allowance (DA) is a component of basic salary tied to inflation. It impacts the monthly pay of central government employees, public sector staff, defence personnel, bank employees and retired pensioners aimed at mitigating rising inflation.
DA is revised twice annually based on the All-India Consumer Price Index () formula as prescribed under the 7th central pay commission. Annually, the announcements are mostly made in March and October, with rollouts scheduled in January and July.
The Centre last hiked DA by 2% in April this year, effectively taking the component to 60% of the basic pay for central government employees and pensioners. Notably, DA is only offered to public sector employees and is not part of compensation for private sector workers to mitigate .
Explained: What is DA merger?
The 7th CPC, which revised formula also stipulated that DA be merged with basic salary if it exceeds 50%, according to a Bank Bazaar report. As of the last DA hike, the component is now 60% of basic pay and may rise further if another hike is announced in July. Expectations are of a 3-4% hike in the month.
Multiple employee unions and representative groups have demanded that the Centre make an official announcement on — given that DA now exceeds 50% of basic salary.
DA merger: Why is the issue in focus?
Notably, the government has not officially announced a DA merger as of June 2026, despite multiple employee unions raising the issue. The issue has gained traction because basic salary determines other components of compensation such as provident fund contribution, , allowances, gratuity, and more. Thus, merging DA into the basic pay will lead to substantial and automatic increase in overall pay and consequently the other dependent allocations.
About 50 lakh central government employees and around 65 lakh retired central government , including defence personnel and retirees, will benefit from an increase in DA and basic pay. There are 18 levels of employees, and the individual hikes will depend on the level of the employee or pensioner as basic pay of these employees differs from level to level.
Here’s the Finance Ministry’s clarification on DA merger
Amid demands from employee unions for DA merger with basic pay and a higher fitment factor under the 8th pay commission (CPC), the Centre has clarified that no such proposal is currently under consideration.
Notably, the 8th CPC has reached its eighth month, and consultations are ongoing with various employee representative groups, unions, and stakeholders before it officially issues recommendations next year. Thus, till such time that the commission announces its decision on structure, the DA component and salary will continue unchanged under the current mechanism.
Top DA demands from prominent employee groups
- The All India Defence Employees Federation () is seeking inflation-adjusted compensation demands. It has also suggested that minimum pay be hiked to ₹69,000 per month.
- The Maharashtra Old Pension Organisation has suggested minimum DA hike of 4% and DA merger at 50%. It has also suggested that minimum pay be hiked to ₹65,000 per month.
- The National Council – Joint Consultative Machinery (NC-JCM) has demanded that DA be updated into an inflation-linked wage model. It has also suggested that minimum pay be hiked to ₹69,000 per month, from the current ₹18,000.
- The AIDEF in a second memorandum submitted to the 8th CPC also sought a change in how DA is calculated. It argued that the current assigns higher weightage to relatively stable expenditure categories, while employees, especially those on lower pay grades, spend a larger percentage of their salary on food, education, healthcare, house rent, medicines and other essentials.
When is the 8th pay commission decision expected?
Reports feel that another announcement could come this year in July or September amid inflationary pressures and as employees and pensioners seek relief against steadily rising living expenses.
As per the usual timeline, the CPC is expected to submit its final recommendations around 18 months after its constitution which means that the earliest, we can expect an announcement is February or April 2027.
Further, based on past trends, once the pay commission’s recommendations are made, the rollout takes another two to three years to complete. This means that hikes announced in 2027 may only be fully implemented by 2029 or 2030.