New Delhi, April 18: The Union Cabinet, chaired by Narendra Modi, has approved a 2% increase in Dearness Allowance (DA) for central government employees, effective January 1, 2026, providing a boost to take-home salaries.
The decision also includes a corresponding increase in Dearness Relief (DR) for pensioners, taking the allowance to 60% of basic pay/pension, up from the existing 58%, to offset inflationary pressures.
According to an official statement, the combined annual financial impact on the exchequer is estimated at ₹6,791.24 crore. The move is expected to benefit approximately 50.46 lakh central government employees and 68.27 lakh pensioners.
The DA revision follows the established formula based on recommendations of the 7th Central Pay Commission, which links adjustments to inflation metrics.
The increase comes amid rising expectations around broader salary restructuring under the proposed 8th Central Pay Commission. In a memorandum submitted to the government, the National Council – Joint Consultative Machinery (NC-JCM) has proposed a significantly higher fitment factor of 3.83.
If implemented, the proposal could raise the minimum basic pay from ₹18,000 to around ₹69,000, marking a substantial revision in the compensation framework. The council has also recommended additional measures, including a 6% annual increment, two increments on promotion, and enhanced gratuity benefits.
The fitment factor—used to revise salaries by applying a multiplier to the existing basic pay—remains a key determinant in the final structure to be adopted by the next pay commission. Any changes under the new framework are expected to impact over 50 lakh employees and nearly 65 lakh pensioners, reinforcing the broader fiscal and consumption implications of the revision.
