DA Hike: Good news before Holi? 7th Pay Commission likely to grant 2% DA hike to employees and pensioners

The Central Government is likely to announce a dearness allowance (DA) and dearness relief (DR) hike of 2 per cent for its employees ahead of the festival of Holi (March 14, 2025), reported multiple media outlets.

According to a Moneycontrol report, more than 12 million central government employees and pensioners are set to benefit from this salary hike under the 7th Pay Commission, which was implemented on January 1, 2016. 

As a result of this move, the employees' dearness allowance is set to increase to 55 per cent from its current 53 per cent level of basic pay. However, Prime Minister Narendra Modi is expected to announce the final decision in the Union Cabinet.

The last dearness allowance hike was in October 2024. Central government employees received an increase of 3 per cent, bringing their DA to 53 per cent, compared to the previous level of 50 per cent of the basic pay. The hike came into effect on July 1, 2024, and was also applicable to pensioners, according to the report.

Dearness allowance is a segment of a central government employees' salary and dearness relief is granted to the pensioners. 

How to calculate DA?

Dearness Allowance is a salary component for central government employees which the government pays them to help reduce the impact of the rising inflation in the economy, according to a Bajaj Finserv report.

According to the data, the increase in the dearness allowance for central government employees is calculated based on the percentage increase in 12 monthly averages of the All India Consumer Price Index (AICPI), i.e., the inflation indicator, for the period ending June 2022.

The central government revises the payout of the allowances every year in Janaury and June, but the announcement is followed in March and September, as per the news reports. 

Formula for calculating DA:

The percentage of the dearness allowance amount can be calculated in the following methods:

Dearness Allowance Percentage: ((Average of All-India Consumer Price Index (Base Year 2001=100) for the past 12 months -115.76)/115.76) x 100.

For Central public sector employees: DA% = ((Average of All-India Consumer Price Index (Base Year 2001=100) for the past 3 months -126.33)/126.33) x 100.

The latest Consumer Price Index for Industrial Workers (CPI-IW) indicates that the DA for the central government employees is set to be increased by 2 per cent, effective from January 2025. The DA will increase to 55.98 per cent under the 7th Pay Commission.