DA hike: Finance Ministry increases Dearness Allowance for central govt employees by 2% wef 1 January 2026

The Ministry of Finance on 22 April announced revision of rates of Dearness Allowance (DA) for central government employees, effective from 1 January 2026. It added that the President has sanctioned the proposal dated 6 October 2025.

In an office memorandum from the Department of Expenditure, the ministry noted that DA payable to central government employees shall be increased from 58% to 60% of Basic Pay, with effect from 1 January, 2026.

This means that for a central government employee earning ₹50,000 as basic pay, they will get a hike of ₹1,000 in the salary head.

Finance Ministry hikes DA: All we know

• As per the ministry, the term 'Basic Pay" in the revised pay structure means the pay drawn in the prescribed Level in the Pay Matrix as per 7th central pay commission (CPC) recommendations accepted by the Government.
• Basic pay does not include any other type of pay such as special pay, etc., it added.

• Further, the announcement said that Dearness Allowance will continue to be a distinct element of remuneration and will not be treated as pay within the ambit of its fundamental rules.
• Payment on account of Dearness Allowance involving fractions of 50 paise and above may be rounded off to the next higher rupee and the fractions of less than 50 paise may be ignored.
• The increase also applies to civilian employees paid from the Defence Services estimates and the expenditure will be chargeable to the relevant head of the Defence Services Estimates.

• In respect of Armed Forces personnel and Railway employees, separate orders will be issued by the Ministry of Defence and Ministry of Railways, respectively.

What is Dearness Allowance?

Dearness Allowance (DA) is a percentage of employees' basic salary designed to help mitigate the effects of inflation on their living expenses. This allowance is typically revised every six months to reflect fluctuations in the cost-of-living index.

DA is determined by the All India Consumer Price Index (AICPI), which monitors retail price fluctuations, and is updated twice annually. An increase in DA results in higher take-home pay for government employees, offering some relief as inflation continues to affect households.

The Centre typically raises the dearness allowance (DA) and dearness relief for employees and pensioners twice a year, in January and July, with announcements generally occurring in early March and October.

How is Dearness Allowance calculated?

Dearness allowance is a cost-of-living adjustment included in a government employee's salary. It aims to offset inflation and maintain purchasing power. The rates are usually reviewed and updated twice a year. Over time, the proportion of basic pay in total salaries has decreased, while allowances have increased.

Who will benefit from DA hike?

As many as 50 lakh central government employees, including defence personnel, and around 65 lakh retired central government pensioners, including defence retirees will benefit from the DA hike.

The hike was earlier announced by Union Information and Broadcasting (I&B) Minister Ashwini Vaishnaw after the Cabinet meeting on 18 April. He told reporters: “Another very big decision was taken today. I would like to extend my heartiest congratulations. DA and Dearness Relief (DR) have been increased for all our central government employees and pensioners, which will cost the Government of India a total of Rs. 6,791 crore. Basically, DA and DR will become 60% of the basic pay from January 1, 2026. It has been increased by 2%, from 58% to 60%. It will become 60% of the basic pay. There are a total of about 50 lakh employees and 68 lakh pensioners of the Government of India. This will be a huge benefit for all of them.”