8th Pay Commission: Govt explains if 58% DA be merged with basic pay

8th Pay Commission Updates: Finance Ministry statement means any fundamental changes to the pay structure will likely only come from the newly constituted 8th Central Pay Commission

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Groups representing central government employees want dearness allowance to be merged with basic pay, arguing that such a step will help them save tax.

 

DA became 58 per cent of central government salaries earlier this year. With the Eighth Central Pay Commission formally constituted, employee groups expect a possible merger.

 

Replying to a question in Lok Sabha on December 1, Minister of State for Finance Pankaj Chaudhary stated that the government is not examining any plan to combine the existing DA with basic pay.

 

DA and dearness relief (DR) are revised twice a year to offset inflation based on the All-India Consumer Price Index for Industrial Workers. The practice serves the purpose of protecting the real value of salaries and pensions, he said.

 

Chaudhary’s response came after Anand Bhadauria, Samajwadi Party MP from Dhaurahra Lok Sabha constituency, asked whether the government intended to merge DA/DR as a relief measure for employees and pensioners facing high inflation, and whether any notification on the 8th Pay Commission had been issued.

 

Chaudhary confirmed separately that the government notified the constitution of the 8th Central Pay Commission on November 3.

 

How DA works

 

DA is a cost-of-living adjustment paid to central and state government employees to help cushion the impact of rising prices. It is calculated as a percentage of an employee’s basic salary and is revised twice every year.

 

With the present DA at 58 per cent, an employee with a basic pay of Rs 1 lakh receives Rs 58,000 as DA.

 

Basic pay itself is determined by the pay matrix set under the 7th Pay Commission. It forms the foundation for major allowances such as DA and house rent allowance.

 

What DA–basic pay merger would mean

 

Although merging DA with basic pay does not immediately raise take-home pay, it has long-term implications. A higher basic salary lifts future annual increments and increases allowances that are computed as a percentage of basic pay. This leads to a structural rise in overall earnings. 

 

Illustrative impact (as explained by employee groups):

 

When DA touches 50 per cent, merging it with basic pay would significantly raise the revised basic salary.

 

Future increments, HRA and transport allowance would then be calculated on the higher base.

 

The cumulative difference can widen over time. Some employee representatives estimate a 7–15 per cent gap in total pay over the next couple of years if a merger does not take place.

 

Bottom line

 

Despite repeated demands, the Finance Ministry has clarified that a DA merger is not on the table for now. Any material change in pay structure is likely to come only through the recommendations of the 8th Pay Commission, which has just begun its work.