Latest News – 3% DA Hike Announced Before Diwali 2025
The Central Government announced a significant 3% increase in Dearness Allowance (DA) for central government employees and pensioners, effective from July 1, 2025 .DA for central government employees is set to increase from 55% to 58% (effective July 1, 2025), with official notification issued. Arrears for the previous months will be disbursed together
The Cabinet Committee approved this hike in Oct 2025, just before the Diwali festival, providing much-needed financial relief to over 48 lakh central government employees and 68 lakh pensioners across India. The arrears for July, August, and September will be paid along with the October 2025 salary.
Key Highlights:
- DA increased from 50% to 53% (3% hike)
- Effective date: July 1, 2025
- Payment with arrears: October 2025
- Beneficiaries: 48+ lakh employees, 68+ lakh pensioners
Exact text of DA increase :
The Union Cabinet chaired by the Prime Minister Shri Narendra Modi today has approved to release an additional instalment of Dearness Allowance (DA) to Central Government employees and Dearness Relief (DR) to pensioners w.e.f 01.07.2025 representing an increase of 3% over the existing rate of 55% of the Basic Pay/Pension, to compensate against price rise.
The combined impact on the exchequer on account of increase in both Dearness Allowance and Dearness Relief would be Rs.10083.96 crore per annum. This will benefit about 49.19 lakh Central Government employees and 68.72 lakh pensioners.
This increase is in accordance with the accepted formula, which is based on the recommendations of the 7th Central Pay Commission.
Department of Expenditure (DOE) official order – view the latest DA notifications and updates from the government’s official expenditure department.
What is Dearness Allowance (DA) and How Is It Calculated?
Dearness Allowance is a cost of living adjustment allowance paid to government employees to mitigate the impact of inflation. The DA calculation is based on the All India Consumer Price Index (AICPI) and follows the 7th Pay Commission recommendations.
How is DA calculated for central govt employees?
The DA calculation formula as per 7th CPC:
DA% = [(Average of AICPI (IW) for the past 12 months – 302.33)/302.33] × 100
Where:
- AICPI (IW) = All India Consumer Price Index for Industrial Workers
- 302.33 = Base index as per 7th Pay Commission
The calculation is done every six months (January and July) based on the previous 12 months’ average AICPI data.
DA Hike Timeline: Effective Dates, Arrears & Payment Schedule
Timeline for October 2025 DA Hike:
| Date | Event |
|---|---|
| July 1, 2025 | DA hike effective date (backdated) |
| September 2025 | Cabinet approval anticipated, not done |
| October 2025 | With Cabinet approval Payment with 3 months arrears |
| November 2025 | Regular payment at new rates |
Arrears Calculation:
- July 2025: 3% additional DA
- August 2025: 3% additional DA
- September 2025: 3% additional DA
- Total: 3 months of arrears to be paid
Impact Calculator – Check Your Revised Salary & Pension
Sample DA Increase Calculation:
| Basic Pay | Old DA (50%) | New DA (53%) | Monthly Increase | Annual Increase |
|---|---|---|---|---|
| ₹18,000 | ₹9,000 | ₹9,540 | ₹540 | ₹6,480 |
| ₹35,000 | ₹17,500 | ₹18,550 | ₹1,050 | ₹12,600 |
| ₹56,100 | ₹28,050 | ₹29,733 | ₹1,683 | ₹20,196 |
Use our comprehensive DA Calculator to calculate your precise DA increase and arrears amount for the 3% hike. For historical context, check our complete guide on DA history and previous hikes to see how DA has evolved over time.
Note: Actual increase may vary based on other allowances and deductions
Effect on Pensioners & Dearness Relief (DR)
Pensioners will receive Dearness Relief (DR) at the same rate as DA for serving employees. The 3% increase in DR will be applicable on the basic pension amount.
For Pensioners:
- DR increased from 50% to 53%
- Calculation based on basic pension
- Family pensioners also eligible
- Payment timeline same as employees
Sample DR Calculation:
- Basic Pension: ₹25,000
- Old DR (50%): ₹12,500
- New DR (53%): ₹13,250
- Monthly Increase: ₹750
What to Expect with 8th Pay Commission & DA Merger (Jan 2026)
The 8th Pay Commission is expected to be implemented from January 1, 2026. Key expectations regarding DA:
What happens to DA after the 8th Pay Commission?
- DA Merger: Current DA (58%) will be merged with basic pay
- New Fitment Factor: Expected 2.86 times current basic pay
- Fresh DA Start: DA will restart from 0% with new pay scales
- Benefit Protection: No employee will receive less than current total pay
Timeline:
- January 2026: 8th CPC implementation
- DA merger into basic pay
- New pay matrices effective
- Fresh DA calculation starts
Tax/Finance FAQs: Arrears, Taxation, HRA, Other Allowances
Taxation of DA Arrears:
- DA arrears are fully taxable
- No special tax treatment for lump sum arrears
- Include in total income for the payment year
Impact on Other Allowances:
- HRA: Calculated on Basic + DA
- Transport Allowance: No change
- City Compensatory Allowance: May increase in some cities
Financial Planning Tips:
- Plan for higher tax liability due to arrears
- Consider investment options for lump sum arrears
- Review insurance coverage based on increased salary
Featured FAQs
Q: When will DA be paid?
A: The 3% DA hike will be paid with October 2025 salary along with arrears for July, August, and September 2025.
Q: How much will DA increase in October 2025?
A: DA has increased by 3 percentage points, from 50% to 53% of basic pay, effective July 1, 2025.
Q: Who gets the DA hike?
A: All central government employees, pensioners, and family pensioners are eligible for this DA increase.
Q: Will 8th CPC change DA rules?
A: Yes, the 8th Pay Commission (expected Jan 2026) will merge current DA into basic pay and restart DA calculation from 0%.
Q: Is DA taxable?
A: Yes, DA is fully taxable as part of salary income. DA arrears are also taxable in the year of receipt.
Q What will be the DA rates from January 2026?
A: we have created a comprehensive post on Expected DA from Jan 2026 Calculator and 8th CPC Fitment Factor
References & Official Orders
- Department of Expenditure (DOE) Official Order – Latest DA notification