Central government employees and pensioners are likely to see a further increase in their Dearness Allowance (DA) and Dearness Relief (DR) from January 2026. The potential hike is expected to be around 4%, bringing significant financial relief.
Impact of the DA Hike
The anticipated 4% DA increase will directly impact the monthly earnings of both active employees and pensioners, providing a welcome cushion against rising living costs. For example, employees with a basic salary of ₹18,000 could see a considerable increase in their monthly income. Pensioners, in particular, stand to benefit, as the DA hike will ease the burden of medical and household expenses.
DA Calculation and the 8th Pay Commission
The increase in DA is based on the latest data from the Labour Bureau, which indicates a rise in the Consumer Price Index for Industrial Workers (CPI-IW). The All-India CPI-IW for November 2025 stood at 148.2, a 0.5-point increase. This upward movement suggests a total DA/DR of 60% starting January 1, 2026. The government only considers the whole number for DA disbursement. Therefore, a figure between 60.00% and 60.99% will be officially announced as 60%.
Notably, January 1, 2026, marks the official commencement of the 8th Central Pay Commission (CPC). The 8th Pay Commission was approved on January 16, 2025, and is expected to submit its report within 18 months. While the 60% figure is the benchmark for the final 7th CPC adjustment, it will serve as the "inflation buffer" that helps determine the Fitment Factor for the new 8th CPC salary structure.
8th Pay Commission: What to Expect
The 8th Pay Commission is set to restructure the pay and pensions of over one crore central government employees and retirees. A key aspect under review is the fitment factor, which determines how much current pay will be multiplied to arrive at the revised structure. While the 7th Pay Commission used a fitment factor of 2.57, the new commission might set it as high as 2.86. If this happens, the minimum basic salary may increase significantly, potentially from Rs. 18,000 to Rs. 51,480, and pensions may rise from Rs. 9,000 to Rs. 25,740.
Looking Ahead
Central Government employees can anticipate a formal announcement regarding the 60% DA hike by March or April 2026, with arrears paid retrospectively from January. The government's commitment to adjusting DA and DR ensures that employees' purchasing power keeps pace with inflation.
