Cabinet Clears 3% Hike Ahead of Diwali
New Delhi: The central government has announced a 3 per cent increase in Dearness Allowance (DA) for central government employees and Dearness Relief (DR) for pensioners, in a festive-season decision cleared by the Union Cabinet. The move will benefit more than one crore employees and pensioners across the country.
With this revision, DA rises from 55 per cent to 58 per cent of basic pay, with effect from July 1, 2026. Employees will receive arrears for the months of July, August and September along with their October salary — a timely boost to household budgets just weeks before Diwali.
What Is Dearness Allowance?
Dearness Allowance is a cost-of-living adjustment paid to government employees to cushion the impact of rising prices. It is calculated as a percentage of basic pay and is revised twice a year — in January and July — based on the All India Consumer Price Index for Industrial Workers (AICPI-IW). Pensioners receive the same benefit in the form of Dearness Relief, which moves in lockstep with DA.
Who Benefits and By How Much
The increase covers all central government employees, including civilian staff, defence personnel and railway employees, as well as central government pensioners and family pensioners. For an employee with a basic pay of Rs 50,000, the 3 per cent hike translates into an additional Rs 1,500 every month. With three months of arrears added, the October payout will carry an extra Rs 4,500 over and above the revised monthly allowance.
Why the Festive Timing Matters
The announcement comes at a moment when household spending traditionally peaks. Employee unions and staff associations have welcomed the decision, saying the arrears will provide meaningful relief during the high-expenditure festival period. The government has in the past frequently timed DA announcements to coincide with major festivals such as Diwali and Holi.
Background: How DA Has Moved
DA has climbed steadily over the past few years as inflation stayed elevated, reaching the 55 per cent mark earlier this year. Under the 7th Pay Commission framework, DA is merged into basic pay — and reset — only when a new pay commission’s recommendations are implemented. With the 8th Central Pay Commission now on the horizon, this revision could be among the last under the existing structure.
What Happens Next
Following the Cabinet’s approval, ministries and departments will issue formal orders and begin disbursing the revised allowance along with arrears. Employees are advised to check their October salary slips, which should reflect both the enhanced 58 per cent DA rate and the arrears for July to September. Further clarity on the 8th Pay Commission’s timeline is expected in the coming months.
