The Finance Ministry in April announced 2% increase in Dearness Allowance for central government employees and pensioners with effect from 1 January 2026, effectively taking DA to 60% of basic pay from 58%.
Notably, DA is a percentage of ‘ pay aimed at helping households manage increased cost-of-living. It is provided by the central government for its employees and retired pensioners and is not offered by private sector employers.
Around 50 lakh central government employees and some 65-lakh retired central government , including defence and railway staff and retirees benefit from DA hikes. Notably, there are 18 levels of employees, and the increase in salary for each will depend on the pay matrix specified for each level.
Could employees get 3-4% DA hike? Numbers indicate…
While we still await June data from the Labour Bureau’s All India Consumer Price Index for Industrial Workers (-IW), latest government data showed retail inflation in April 2026 rose to 3.48%, while food inflation climbed to 4.20%.
Data from the AICPI-IW for March 2026 showed the index at 149.1, for April 2026 at 149.9 and for May 2026 at 150.8. AICPI-IW for June 2026 is estimated at 151.7 based on approximate calculation, assuming the AICPI-IW increases in June at more or less the same rate as in May 2026. Notably, the index is updated monthly, and measures retail inflation based on fluctuation in price of goods and services consumed by industrial workers.
As per estimated trends based on data from the AICPI-IW, employees are expecting 3-4% this month. The final revision, however, will depend on the June 2026 AICPI-IW data and the government’s approval.
How is the DA hike calculated?
DA hikes are calculated based on the AICPI’s 12-month average, using the method prescribed by the . The formula used is as follows, according to Clear Tax:
- For Central Government Employees: DA percentage = [(Average of AICPI (Base Year 2001 = 100) for the last 12 months – 261.42) / 261.42] x 100
- For Public Sector Employees: DA percentage = [(Average of AICPI (Base Year 2001 = 100) for the last three months – 126.33) / 126.33] x 100
Thus, assuming the June 2026 AICPI-IW rises at a similar pace, the 12-month average index is estimated at around 148.63. The formula would work as follows:
DA percentage = (148.63 × 2.88 − 261.33) / 261.33 × 100
= (428.05 − 261.33) / 261.33 × 100
= 192.84 / 261.33 × 100 = 63.7%
With DA at 60% since January 2026, the estimated increase comes to around 3.7%. The government generally rounds off the final figure, which may eventually result in a 3-4% , depending on whether the final number is rounded up or down.
DA hikes: What is the historic trend?
DA is revised twice a year by the All-India Consumer Price Index () to match cost-of-living. New announcements generally occur in early March and October, with rollouts in January and July.
There have been 10 hikes under the 7th Pay Commission, with the highest being 11% in July 2021. Here’s a look at historic DA hikes announced under the previous commission:
| Effective Date | DA (%) | Increase (%) | Order Issue Date |
|---|---|---|---|
| Jan 2021 | 17% | – | July 2021 |
| Jul 2021 | 28% | +11% | Oct 2021 |
| Jan 2022 | 34% | +3% | Mar 2022 |
| Jul 2022 | 38% | +4% | Sep 2022 |
| Jan 2023 | 42% | +4% | Apr 2023 |
| Jul 2023 | 46% | +4% | Oct 2023 |
| Jan 2024 | 50% | +4% | Mar 2024 |
| Jul 2024 | 53% | +3% | Oct 2024 |
| Jan 2025 | 55% | +2% | Mar 2025 |
| Jul 2025 | 58% | +3% | Oct 2025 |
| Jan 2026 | 60% | +2% | Apr 2026 |
| Source: Clear Tax | |||
Notably, while the 8th pay commission will recommend a hike, it is the Union Cabinet that makes the final decision after reviewing all data.