The employees of the central government and pensioners are to benefit from the final installment of dearness allowances adjustments from the 7th Pay Commission, effective January 2026. The increase of 2% in DA (from 58% to 60% of the basic payment) will come into effect on January 1, 2026. This is after the latest AICPI-IW reading of 148.2 in November 2025 that more or less caught up with the inflationary trend during the transition phase to the 8th Pay Commission.
Background on the DA Calculation
For the purpose of computation, the Dearness Allowance for any specific period is based on annual averages of All India Consumer Price Index for Industrial Workers from July through June (base 2016=100). For release through June, the average price rise so far in the year was 59.94%, rounded to 60% as first considered by some calculations and then for official policy. The final decision awaits with the December 2025 data on this 2% increase.
DA Rate Progression Table
| Period | DA Rate | Increase from Previous |
|---|---|---|
| July 2025 | 58% | 3% |
| January 2026 | 60% | 2% |
This brings cumulative DA under 7th CPC to 60% before merger.
Financial Impact on Salaries and Pensions
The hike brings us an advantage that is seen; hence the wages become directly payable after DA reaches 30,000, discounting by 1,000 from 29,000 earned in 2024. DR similarly expands for pensioners. By applying a minimum amount of Rs. 12,000 annually to the worker here on account of this. So the wage arrears are flush from January until the latest agreed-in case. In the same note, essential expenditure for groceries, utilities, etc., is made much easier on over 50 lakh employees against 69 lakh pensioners.
Cabinet Approval and Arrears Timeline
The formal announcement is expected to come through cabinet approval from 2026, March-April, giving the go-ahead for outright payment of arrears. Payment will be retrospective from January 1, similar to the 3% hike in July 2025 (approved through OM dated October 6, 2025).
Transition to 8th Pay Commission
There is the end of 7th CPC on December 31, 2025, and formally, the 8th CPC becomes a theoretical reality on January 1, 2026 (the report being due by mid-2027). There is no proposal of merger of DA with BP before that date as recorded by the MoF in a reply before Parliament in December 2025. There is a fitment factor of about 2.57-2.86 merging six-tenths of DA with the new BP and rebasing the freshly released DA pay element near to 0 percent. Proceeds from arrears will be rationed out as they come.
Planning Ahead
Calculated average DA calculations estimates using sites like igecorner.com. Changed your bank account for arrears. This rise provides a certain amount of comfort for the transition while everything gets reshaped.
The order would come at any time now from DoPT/DoE. The semi-annual raise in DA comes just in time ahead of long-awaited little babies.