Cabinet approves 3% DA hike for central govt employees, pensioners

Ahead of the festival season, the Union cabinet on Wednesday approved a 3 per cent hike in the Dearness Allowance (DA) to central government employees and Dearness Relief (DR) to pensioners with effect from July 1, 2025.

 

“The Union cabinet chaired by the Prime Minister Narendra Modi today has approved to release an additional instalment of Dearness Allowance (DA) to central government employees and Dearness Relief (DR) to pensioners w.e.f 01.07.2025 representing an increase of 3 per cent over the existing rate of 55 per cent of the Basic Pay/Pension, to compensate against price rise,” a press statement said.

   

The combined impact on the exchequer on account of increase in both DA and DR would be ₹10,083.96 crore per annum.

 

The move will benefit about 491,900 central government employees and 687,200 pensioners.

 

The Finance Ministry said that the increase is in accordance with the accepted formula, which is based on the recommendations of the Seventh Central Pay Commission.

 

DA and DR are paid to central government employees and pensioners to adjust the cost of living and to protect their basic pay or pension from erosion in the real value. 

 

It is revised twice a year on January 1 and July 1, based on the increase in the 12-month average of All India Consumer Price Index for Industrial Workers (AICPI-IW) published by the Labour Bureau.

 

A 2 per cent hike in DA was announced in March 2025 with effect from April 1, 2025. 

Specialtax devolution for states 

The Centre on Wednesday released an additional tax devolution of ₹1,01,603 crore to state governments, in a bid to boost states’ spending ahead of the festival season, along with financing their development and welfare-related expenditure. This is in addition to the usual monthly devolution due for release on October 10, according to the Finance Ministry. BS Reporter