Dearness allowance is calculated based on the Consumer Price Index for Industrial Workers (CPI-IW). This data is released monthly by the Labor Bureau. The government applies a specific formula based on the average CPI-IW for the previous 12 months, as determined under the 7th Pay Commission.
Good news is coming for central government employees before Diwali. According to media reports, the central government is expected to announce a dearness allowance (DA) increase for July 2025 around Diwali. Currently, employees receive 55% DA on their basic pay. If the government approves the proposed 3% increase this time, the DA will rise to 58%. If this decision is implemented, more than 5 million central government employees and 6.5 million pensioners will benefit.
What is the detail
Experts believe that a DA increase is more likely this time because inflation has cooled in recent months. The government typically revises DA every six months (January and July) based on inflation.
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How is DA decided?
Dearness allowance is calculated based on the Consumer Price Index for Industrial Workers (CPI-IW). This data is released monthly by the Labor Bureau. The government applies a specific formula based on the average CPI-IW for the previous 12 months, as determined under the 7th Pay Commission: DA (%) = [(12-month average CPI-IW – 261.42) ÷ 261.42] × 100.
(Here 261.42 is the CPI-IW average based on 2016 base year, which has been adopted by the 7th Pay Commission.)
Impact on employee salaries
If the 3% DA increase is implemented, an entry-level employee (basic pay ₹18,000) previously received ₹9,900 DA (55%). This will now increase to ₹10,440 (58%), meaning an additional income of ₹540 per month. Similarly, an employee earning ₹30,000 per month (also with a basic pay of ₹18,000) previously received ₹9,900 DA. This will now increase to ₹10,440, meaning a benefit of ₹540 per month and approximately ₹6,480 per year.
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