Has the Cabinet Approved a 3% Increase in DA for Central Government Employees and DR for Pensioners?
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Synopsis
The Union Cabinet has formally approved a significant 3% rise in Dearness Allowance for employees and Dearness Relief for pensioners, effective from July 1, 2025. This adjustment not only aims to counteract inflation but also to provide financial relief to millions of Central government workers and pensioners in time for the festive season. Discover how this change will impact your finances.
Key Takeaways
- DA and DR increased to 58% from 55%.
- Effective from July 1, 2025.
- Annual financial impact of Rs 10,083.96 crore.
- Benefits over 1 crore individuals.
- Arrears will be paid before Diwali.
New Delhi, Oct 1 (NationPress) The Union Cabinet, led by Prime Minister Narendra Modi, has approved an additional instalment of Dearness Allowance (DA) for Central government employees and Dearness Relief (DR) for pensioners, effective from July 1, 2025. This increment is a 3% rise over the current rate of 55% of the basic pay or pension, aimed at cushioning the effects of inflation.
The financial burden to the exchequer from this adjustment in both DA and DR will amount to Rs 10,083.96 crore annually, benefiting approximately 49.19 lakh Central government employees and 68.72 lakh pensioners, as per an official announcement.
This modification adheres to the established formula based on the 7th Central Pay Commission's recommendations, as stated in the release.
As a result, the DA and DR will now increase to 58% of basic pay and pension, up from the previous 55%. The increase will be applied retroactively from July 1, 2025, with arrears for July, August, and September to be disbursed along with the October salaries, just in time for Diwali celebrations.
The hike applies to all employees under the 7th Pay Commission, encompassing pensioners and family pensioners. For instance, an employee earning a basic salary of Rs 30,000 will receive an extra Rs 900 monthly, while an individual with a Rs 40,000 salary will see an increase of Rs 1,200. The total arrears for three months will range from Rs 2,700 to Rs 3,600, providing a financial boost during the festive season.
The DA and DR are revised biannually, in January and July, based on inflation indicators from the All India Consumer Price Index for Industrial Workers (CPI-IW). Though announcements may come later, arrears help to offset the lag. This update is likely to be the final adjustment under the 7th Pay Commission, with the 8th Pay Commission anticipated to commence in January 2026.
This adjustment in DA and DR was anticipated as one of the two semiannual hikes is typically announced in March, with the other in October, ahead of Diwali festivities.
The last adjustment in DA and DR occurred in March this year, retroactively effective from January 1, 2025, which reflected a 2% increase to 55% of the basic pay, addressing the impact of rising costs.
The overall effect on the exchequer from this previous increase was Rs 6,614.04 crore annually.
This 2% increase followed a 3% hike in October the previous year, raising the DA to 53% of the basic pay.
Point of View
I view this decision as a timely intervention that acknowledges the rising cost of living faced by millions of government employees and pensioners. The increase in DA and DR reflects the government's commitment to ensuring the financial well-being of its staff, reinforcing trust and stability in public service.
NationPress
01/10/2025
Frequently Asked Questions
What is the percentage increase in DA and DR?
The Union Cabinet has approved a 3% increase in Dearness Allowance for Central government employees and Dearness Relief for pensioners.
When will the new rates take effect?
The new rates will be effective from July 1, 2025.
How much will the increase cost the exchequer?
The combined impact on the exchequer will be approximately Rs 10,083.96 crore annually.
Who will benefit from this increase?
About 49.19 lakh Central government employees and 68.72 lakh pensioners will benefit from this increase.
When will the arrears be paid?
Arrears for July, August, and September will be paid along with the October salary.
