Diwali Gift for Central Government Employees: DA Hike by 3% Likely, Salary to Increase Accordingly

As the festive season approaches, central government employees and pensioners may receive a pleasant financial surprise. According to recent media reports, the Dearness Allowance (DA) is expected to increase by 3% for the July to December 2025 period. This increment will raise the current DA from 55% to 58%, directly impacting the monthly salaries and pensions of over 1 crore beneficiaries across the country.

This would mark the second DA revision this year. The last increment of 2% was implemented in January 2025, pushing the DA to 55%. If the proposed hike is approved in October as expected, it would mean a cumulative increase of 5% in 2025 alone.

How Is DA Calculated?

The Dearness Allowance is revised twice a year — in January and July — and is based on the Consumer Price Index for Industrial Workers (CPI-IW), which reflects inflation and cost of living. The index takes into account prices of essential commodities such as food, fuel, and clothing. The final DA percentage is derived using a formula prescribed by the 7th Pay Commission and data released by the Labour Bureau.

Here’s the DA formula under the 7th Pay Commission:
DA (%) = [(Average CPI-IW × 2.88) – 261.42] ÷ 261.42 × 100

As per the Labour Bureau's June 2025 data, the CPI-IW figure stands at 145, making the average of the past 12 months approximately 143.6. Plugging this into the formula:

• [(143.6 × 2.88) – 261.42] ÷ 261.42 × 100

• = (413.57 – 261.42) ÷ 261.42 × 100

• = 58.2%

Thus, based on this calculation, DA is expected to be revised to 58%.

How Will the DA Hike Affect Your Salary?

Let’s take a simple example:
If a central government employee earns a basic salary of ₹25,000, then:

• At the current DA of 55%, they receive ₹13,750 as DA.

• At 58% DA, this would increase to ₹14,500.

This results in a monthly increase of ₹750, which adds up to ₹4,500 over six months (till the next DA revision).

Although this may seem modest, for employees with higher basic salaries, the increase would be proportionally larger. Moreover, this increment also affects other salary components such as HRA (House Rent Allowance), which is often calculated as a percentage of basic pay plus DA.

What About the 8th Pay Commission?

Many employees are also curious about updates on the 8th Pay Commission, which is expected to bring a comprehensive revision in salaries and allowances. However, based on past trends, it usually takes 18–24 months from formation to implementation. If the same pattern continues, recommendations of the 8th Pay Commission may only come into effect by 2027.

Until then, DA hikes remain the primary route for salary adjustments to offset inflation.

Conclusion

The proposed 3% DA hike may seem incremental, but for over a crore employees and pensioners, it represents a much-needed relief amid rising living costs. While the final decision will be taken closer to October 2025, the formula and index data already point toward this likely revision. It also reinforces the government’s commitment to maintaining employees' purchasing power as inflation fluctuates.

Stay tuned for the official announcement from the Ministry of Finance in the coming months.