DA: Highest Dearness Allowance increase of 11% was in 2021 in the 7th CPC — Here's how much hikes have been announced

Dearness Allowance for central government employees and pensioners (including railways and defence personnel) has been hiked from 58% of Basic Pay to 60%, with effect from January, the Finance Ministry announced last week.

DA or dearness relief (DR) is a percentage of an employees' basic salary specifically meant to help households with increased cost-of-living by increasing in-hand salary. It is revised twice a year by the All-India Consumer Price Index (AICPI) to counter inflation fluctuations. New announcements generally occur in early March and October, with rollouts in January and July.

Notably, the highest DA hike for central government employees came in 2021 with an 11% increase from the central pay commission.

How much has Dearness Allowance increased?

The 2% DA hike announced last month is calculated on the 12-month average as per the method prescribed by the AICPI under the 7th Pay Commission. Here's a look at all the hikes in DA announced under the previous CPC, with the highest increase announced in 2021:

Who benefits 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. Notably, there are 18 levels of employees, and the individual hikes will depend on the level of the employee or pensioner as basic pay of these employees differs from level to level.

DA is usually provided by the central government for its employees. The private sector in India has not offer the same for its employees or pensioners.

Is Dearness Allowance part of CTC?

DA is part of an employee's cost-to-company (CTC) and is credited as part of the monthly salary for central government employees. As per the ministry, payment on account of DA 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.

Is Dearness Allowance subject to income tax?

DA for salaried employees is subject to income tax in its entirety. Income-Tax Rules mandate that the DA component is stated separately in a taxpayers I-T returns (ITR).

Does Dearness Allowance differ as per your location?

Yes, according to Clear Tax. Since DA is connected to cost-of-living, the amount differs for each employee depending on their work location and can vary depending on the area being urban, rural or semi-urban.

What is the 8th pay commission?

Constituted by the Centre every 10 years to revise the allowances, pay and pensions of its employees, the CPC is responsible for decisions on contributions, retirement benefits and government spending. The 8th CPC is thus also set to make big decisions on salary hikes, dearness allowance, fitment factor and other allowances for central government employees.

What is the CPC's role in DA and other allowances?

The panel gathers views and inputs from employee unions, labour groups, ministries, pension bodies and other similar stakeholders, which will then be analysed to decide allowances, pension formula and salary structures for the relevant employee and retiree groups.

Discussions and feedback from stakeholders are also solicited before the Commission provides its final recommendations. Notably, it opened formal memorandum submissions and scheduled stakeholder consultations in March and April 2026. The CPC in a statement last week also said that it will hold more meetings in the national capital and in other states and union territories “in due course” over the next months.

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