Central government employees and pensioners are in for a festive treat this Raksha Bandhan! The government has announced a 4% hike in Dearness Allowance (DA) and Dearness Relief (DR), effective from July 1, 2025. This increase raises the DA from 55% to 59%, bringing relief to over one crore employees and pensioners across India. The decision, based on rising inflation, is a big gift ahead of the Raksha Bandhan festival on August 8, 2025. Here’s everything you need to know about this DA hike, how it’s calculated, and what it means for employees.
Why the DA Hike?
Dearness Allowance (DA) helps government employees and pensioners cope with the rising cost of living. It is revised twice a year—January and July—based on the All India Consumer Price Index for Industrial Workers (AICPI-IW). The recent hike comes as inflation showed a slight increase, with the AICPI-IW moving from 143 in March 2025 to 144 in May 2025. This 4% increase is meant to ease the financial burden of everyday expenses like food, fuel, and other essentials, especially during the festive season.
Who Will Benefit?
The DA hike applies to all central government employees and pensioners under the 7th Pay Commission. This includes workers in ministries, railways, defense, and other central government sectors, as well as those receiving pensions. The DR hike benefits retired employees, ensuring they too can manage rising costs. Here’s who qualifies:
- Central government employees under the 7th Pay Commission.
- Pensioners receiving Dearness Relief (DR).
- Employees and pensioners with basic pay or pension calculated as per the 7th Pay Commission rules.
This hike will also include arrears for July and August 2025, meaning employees will get extra money in their next salary.
How Much Will You Get?
The 4% DA hike is calculated on your basic pay or pension. For example, if your basic salary is ₹50,000 per month, the DA increase from 55% to 59% means an extra ₹2,000 monthly (4% of ₹50,000). Pensioners will see a similar boost in their DR. Below is a table showing examples of the DA increase:
| Basic Pay/Pension | Old DA (55%) | New DA (59%) | Monthly Increase |
|---|---|---|---|
| ₹30,000 | ₹16,500 | ₹17,700 | ₹1,200 |
| ₹50,000 | ₹27,500 | ₹29,500 | ₹2,000 |
| ₹80,000 | ₹44,000 | ₹47,200 | ₹3,200 |
Arrears for July and August will be paid with the September 2025 salary, giving employees and pensioners a lump sum boost.
How is DA Calculated?
The DA is calculated using a formula based on the AICPI-IW over the past 12 months. The formula is:
DA (%) = [(12-month average CPI-IW – 261.42) ÷ 261.42] × 100
Here, 261.42 is the base index for the 7th Pay Commission. In May 2025, the AICPI-IW reached 144, and the 12-month average is expected to be around 144.17 by June 2025. This results in a DA of about 58.85%, rounded to 59%. The final figure depends on June 2025 data, but the government has confirmed a 4% hike for now.
What About the 8th Pay Commission?
This is the last DA hike under the 7th Pay Commission, as its term ends on December 31, 2025. Talks about the 8th Pay Commission have started, but it’s unlikely to be implemented by January 2026. Setting up a new pay commission takes 18-24 months, so employees may continue with DA hikes under the current system until 2027. The government might offer interim relief to bridge the gap, but no details are confirmed yet. For now, this 4% hike is a welcome boost for employees and pensioners.
What’s Next for Employees?
The DA hike will be officially announced before Raksha Bandhan, with payments reflecting in September 2025 salaries, including arrears for July and August. Employees should check their payslips to ensure the new DA is applied correctly. Pensioners will see the updated DR in their bank accounts. Keep an eye on the Department of Expenditure’s website (doe.gov.in) for official orders. This hike is a small but meaningful step to help central government workers and retirees manage rising costs during the festive season. Enjoy the extra cash and celebrate Raksha Bandhan with joy