For central government employees and pensioners, the Dearness Allowance (DA) and Dearness Relief (DR) are always the most awaited updates every year. Even a small hike in DA brings a big smile because it increases take-home salary and helps families fight rising prices.
Now, there is strong buzz that the government may soon merge DA with basic salary, which means the DA percentage will reset to zero, but the basic pay will increase. If this happens, it will directly change salaries, pensions, and allowances for nearly 48 lakh central employees and 67 lakh pensioners in India.
How DA is Usually Revised
The government updates DA two times a year – in January and July. But the announcement often comes late.
| DA Revision Cycle | Declaration Month | Payment Status |
|---|---|---|
| January | Usually declared in March | Paid with arrears |
| July | Usually announced in Sept–Oct | Paid with arrears |
if the DA hike is declared late, employees always get arrears from the original date.
For July 2025, reports suggest a 3% DA hike, which means DA will rise from 55% to 58%.
How DA is Calculated
DA is linked to inflation and calculated using the All-India Consumer Price Index for Industrial Workers (AICPI-IW).
- In March 2025, the AICPI-IW stood at 143
- By May 2025, it rose to 144
This rise shows higher inflation, making a 3% DA hike almost certain.
Fun Fact: When the 7th Pay Commission started in 2016, DA was reset to 0%. By January 2025, it had already touched 55%. With the July hike, it will be 58%, and by early 2026, it could cross 60%.
Why DA Merger Matters
Traditionally, when DA crosses the 50–60% mark, the government considers merging DA into the basic salary.
This is important because:
- Basic Pay Increases → boosting the overall salary
- DA resets to zero → but now calculated on higher pay
- Other Allowances Rise → HRA, Transport Allowance, and even Pension go up automatically
Example: If your basic salary is ₹30,000 and DA is 60% (₹18,000), after merger, your new basic salary becomes ₹48,000. Future DA hikes will be calculated on this amount, giving you bigger increments and higher retirement benefits.
Link with the 8th Pay Commission
The discussion on DA merger is gaining momentum because the 8th Pay Commission is expected from January 2026.
| Timeline | Details |
|---|---|
| 7th Pay Commission ends | 31 Dec 2025 |
| 8th Pay Commission begins | From 1 Jan 2026 |
| Status (as of 2025) | Announced, but members & ToR yet to be finalized |
During this transition, the DA merger is highly likely. Employees will start fresh with 0% DA under the 8th CPC, but with a higher basic salary.
Real Impact on Employees & Pensioners
- A 3% DA hike in July 2025 will help manage rising costs of food, fuel, and electricity.
- DA merger will bring a big jump in salaries and pensions.
- Retirement benefits like gratuity and pension will also increase automatically.
- Families depending on government income will see more financial relief.
Expert View: According to financial analysts, once DA crosses 60%, merger is almost unavoidable. Past pay commissions also followed the same pattern.
Historical Trend of DA Merger
| Pay Commission | DA Level When Merged | Year of Merger |
|---|---|---|
| Before 6th CPC | Around 50% | Early 2000s |
| Before 7th CPC | Around 50–60% | 2016 |
| Before 8th CPC | Likely at 60% | 2026 (Expected) |
This historical trend strongly indicates that the same step will be repeated before the 8th CPC.
What to Expect Next
- Short-Term (2025): A confirmed 3% DA hike from July 2025 (to be paid before Diwali).
- Medium-Term (2026): DA expected to touch 60%, likely triggering a merger.
- Long-Term (Post-2026): 8th CPC will reset DA to zero with a new pay structure, giving employees and pensioners a stronger financial base.
Final Thoughts
The upcoming DA hike of 3% in July 2025 may look small, but it is part of a much bigger change. With DA nearing 60% and the 8th Pay Commission on the way, government employees and pensioners are set for a major reset in salary and pension structure.
This is not just about extra money—it means higher job security, better retirement benefits, and stronger protection against inflation. The next few months will be very crucial as the government prepares for these big changes.
Disclaimer
This article is based on official AICPI data, expert analysis, and media reports. No official confirmation has yet been given on DA merger or 8th Pay Commission details. Employees and pensioners should follow official government notifications for accurate updates.