Government of India has confirmed a 3% increase in Dearness Allowance (DA) for Central government employees and pensioners, raising the rate from 55% to 58%.
The hike will be implemented retrospectively from July 1, 2025, and is expected to benefit over one crore employees and retirees across the country.
While the formal notification is anticipated in the October cabinet meeting, the financial impact will be felt immediately through arrears for the months of July, August, and September.
This revision comes ahead of the festive season and is seen as a timely relief for households facing rising living costs.
The DA hike is based on the latest All-India Consumer Price Index (AICPI) data, which showed a steady increase in inflation indicators during the first half of 2025.
Calculation Basis: AICPI Trends from January to June 2025
The government links the DA revision directly to the AICPI, which tracks inflation and cost-of-living changes.
Between January and June 2025, the index showed consistent growth, culminating in a June figure of 145.0.
Officials translated this into a DA rate of 58.18% and rounded it down to 58%, following standard government practice.
Here’s a snapshot of the AICPI progression:
| Month | CPI (IW) Index | DA % Estimate |
|---|---|---|
| Jan 2025 | 143.2 | 56.39% |
| Feb 2025 | 142.8 | 56.72% |
| Mar 2025 | 143.0 | 57.09% |
| Apr 2025 | 143.5 | 57.47% |
| May 2025 | 144.0 | 57.85% |
| Jun 2025 | 145.0 | 58.18% |
Officials rounded the final figure to 58%, which triggered a 3% increase from the previous rate of 55%.
Financial Impact: Monthly and Annual Gains
The DA hike translates into tangible financial gains for employees and pensioners. For example:
- An employee with a basic salary of ₹18,000 will see a monthly increase of ₹540, amounting to ₹6,480 annually.
- At Level-1, where the basic salary is ₹56,900, the monthly increase will be ₹1,707, leading to an annual rise of ₹20,484.
These figures exclude other allowances such as House Rent Allowance (HRA) and Transport Allowance (TA), which may further enhance take-home pay.
Pensioners will also benefit proportionately, depending on their last drawn salary and pension structure.
Dearness Allowance Hike: Administrative Process and Timeline
The cabinet will issue the official notification after its October meeting, even though the hike has already been confirmed.
The Department of Expenditure under the Ministry of Finance is expected to draft the formal proposal shortly.
The government will disburse the arrears for July through September—and possibly October—along with regular salary and pension payments once the hike is approved.
This increase is part of the biannual DA revision process, typically conducted in January and July, and aligns with the recommendations of the 7th Pay Commission.
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