Union govt announces 3% DA hike for employees and pensioners ahead of Diwali

The Union government on Wednesday announced a 3% increase in dearness allowance (DA) for central government employees and dearness relief (DR) for pensioners ahead of Diwali. Union Minister Ashwini Vaishnaw announced the decision that offers a boost to lakhs of beneficiaries ahead of the festive season while briefing the media after the Union Cabinet meeting on Wednesday.

The latest DA hike will raise the allowance from 60% to 63% of basic pay for central government employees under the 7th Pay Commission. The revised rates will be effective retrospectively from July 1, 2026. Pensioners will receive a corresponding increase in dearness relief.

The dearness revision will benefit about 48 lakh central government employees and 68 lakh pensioners.

The annual impact of the dearness allowance and dearness relief increase on the government exchequer is estimated at Rs 10,016 crore.

Dearness allowance (DA) is calculated as a percentage of the basic pay. Therefore, a 3-percentage-point hike in the DA rate translates into an increase in salary amount equal to 3% of basic pay. For instance, employees with a basic pay of Rs 20,000 could receive an additional Rs 600 per month, while those earning Rs 30,000 as basic pay could get Rs 900 more.

Central government employees and pensioners had been eagerly awaiting the Centre's announcement on the dearness allowance hike for the July 2026 tranche. DA and DR revisions are based on a formula-driven approach linked to the 12-month average of the All-India Consumer Price Index for Industrial Workers (AICPI-IW).

The pre-Diwali revision comes after a 2 per cent hike approved by the Cabinet in April, which took the DA and DR rate to 60% of basic pay and pension.

The Central government revises DA and DR twice a year to help employees and pensioners cope with inflation.

DA is a cost-of-living adjustment paid to government employees as a percentage of basic pay. DR is the corresponding benefit for pensioners. Both are intended to offset the impact of rising prices.