The 4% DA increase being mulling over for central government employees and pensioners in India is supposed to have come into force from July 1, 2025, raising the DA rate from 55% to 59%. The need for an increase is due to rising All India Consumer Price Index (AICPI) values that claw away at the earnings of more than one crore employees and pensioners. The increase is expected to be approved around September 2025, providing much-needed money, with the arrears paid back from July. This article focuses on the increase, the calculations involved, and its effects.
Basis for the DA Hike
The DA increase is based on the rise in Consumer Price Index for Industrial Workers (CPI-IW), which reflects inflationary trends. The recent AICPI numbers released for March (143), April (143.5), and May (144), as well as the expected figure of 144.5 for June, indicate that a 4% increase should be given, resulting in 59% DA. The formula used by the 7th Pay Commission, which is the one applied presently for DA calculation, is: DA (%) = [(12-month average CPI-IW – 261.42) ÷ 261.42] × 100. Here, the base year taken is 2016. This mechanism ensures that salaries keep pace with the rising cost of living.
Financial Impact on Employees
An employee with a salary of ₹18,000 is entitled to a DA of 55% of the salary amounting to ₹9,900. With a proposed 4% increase, the DA would come up to 59% or ₹10,620, thus giving an additional benefit of ₹720 per month or ₹8,640 annually to the employees. Those in higher grades will receive these increments corresponding to their basic salaries. DR pensioners will also be benefitted in the same manner so as to enhance their monthly incomes. The money can either be spent on household necessities, saved, or spent on education.
HRA and TA: Yet to Be Revised
Theoretically, once DA reaches 59%, both the HRA and TA will be reviewed. HRA depends on the town category (X, Y, and Z) and can at present be 24%, 16%, and 8% of basic pay, respectively. In the future, it can well become 30%, 20%, and 10%. The TA, which depends on the grade pay and job profile, can be adjusted along with the announcement of the festival bonus and be beneficial to the employees in easing their traveling-related expenses.
Approval and Implementation
The Labour Bureau will publish the CPI-IW index for June 2025 at the end of July, followed by the Union Cabinet’s review in September. An effective date of July 1 will be fixed for the 59% DA subsequent to approval, with arrears for the period of July-September to be paid by October. This is in conformity with the biannual revision procedure as prescribed by the 7th Pay Commission-for January and July.
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