The Union Cabinet has given the green light to the Dearness Allowance (DA) for government employees and the corresponding Dearness Relief (DR) for retired personnel, a 3 percentage point hike. This hike will increase the DA from 55% to 58% of the basic pay or pension and will be in effect from July 1, 2025.
Who’s Taking Advantage & What’s The Financial Impact
The adjustment will affect approximately 49.2 lakh central government employees and 68.7 lakh retired personnel in the country. The additional cost to the government is expected to be around ₹10,084 crore annually. Since the DA is a percentage of the basic, the hike provides direct benefits. For instance, if an employee’s basic salary is ₹22,500, he will be getting ₹675 more per month (₹8,100 more per year) due to the 3% hike. Likewise, a pensioner with a basic pension of ₹12,000 will receive ₹360 more per month (₹4,320 more per year) because of the increase. The arrears for July, August, and September 2025 are expected to be paid along with the salary/pension for October.
Reason For The Hike & Its Timing
The inflation-adjusted method and the passing of time adjustment factor are linked to the increase in DA. The increase is due to the recent issue of the All-India Consumer Price Index (AICPI) and is part of the regular bi-annual review of DA that takes place every six months. The announcement right before the holiday season is a nice surprise for the employees and pensioners who have to cope with the inflation that has already increased their living expenses.
What’s Next: 7th Pay Commission And Beyond
The 3% increase probably constitutes the last adjustment under the 7th Central Pay Commission (CPC) before the 8th CPC, which is likely to be implemented in January 2026. The DA revisions will be carried out under the current structure until the 8th CPC recommendations become effective and could also include further increases every six months.
Practical Advice For Employees & Pensioners
- Verify that the basic pay or pension statement is updated with the new 58% DA/DR from July 2025.
- Find out if the arrears from July–September 2025 have been paid to you.
- For pensioners, keep bank and account details current so that new rate and arrears can be processed without delay.
- Although the increase is slight, it mitigates inflation to some extent, especially for households that are impacted the most by higher prices for basic goods, medical care, and utilities.
Also Read: Retirement Age Hike 2025: Big Change Coming for Government Employees…