For more than 1.17 crore central government employees and pensioners, Wednesday brought news that will show up directly in the monthly pay slip. The Union Cabinet has approved a 3 per cent increase in dearness allowance and dearness relief, taking the rate from 60 per cent to 63 per cent of basic pay and pension. The increase takes effect from July 1, 2026, so arrears for the months since July will also be due.
The decision was announced in New Delhi on October 28 by Information and Broadcasting Minister Ashwini Vaishnaw after a Cabinet meeting chaired by Prime Minister Narendra Modi.
Dearness allowance, or DA, softens the impact of inflation on a government employee’s pay. Dearness relief, or DR, does the same job for pensioners.
What was decided on Wednesday
The Cabinet approved an additional instalment of DA for central government employees and DR for pensioners, raising both by 3 percentage points. The revised rate of 63 per cent applies from July 1, 2026. The previous revision had taken the rate to 60 per cent from January 1, 2026.
The increase follows the accepted formula based on the recommendations of the 7th Central Pay Commission. In simple terms, the formula tracks movements in the consumer price index for industrial workers and converts that into a percentage of basic pay. When prices rise, the allowance rises too, so the real value of pay does not slip as fast.
According to the government, the combined annual cost of this increase will be Rs 10,016.10 crore. That is the extra amount the Centre will spend each year on the higher allowance for serving staff and pensioners together.
Who benefits, and by how much
The decision covers 48.54 lakh central government employees and 68.71 lakh pensioners. Together, that is over 1.17 crore people, spread across ministries, departments and pension offices across the country.
What it means in cash depends on basic pay, since DA is calculated as a percentage of basic pay. As an illustration, an employee with a basic pay of Rs 30,000 a month was receiving Rs 18,000 a month as DA at 60 per cent. At 63 per cent, the DA becomes Rs 18,900 a month, an increase of Rs 900 a month. A pensioner with a basic pension of Rs 20,000 a month would see dearness relief rise by Rs 600 a month on the same basis.
Because the increase is backdated to July 1, employees and pensioners are also entitled to arrears for July, August, September and October. The arrears will be worked out by each department and pension disbursing authority on the revised rate. Staff should check their pay slip for the DA line and the separate arrears entry when the revised payment is processed.
- DA and DR rise by 3 percentage points, from 60 per cent to 63 per cent.
- Effective date: July 1, 2026, with arrears due from that date.
- Beneficiaries: 48.54 lakh employees and 68.71 lakh pensioners.
- Annual cost to the exchequer: Rs 10,016.10 crore.
- Basis: accepted formula under the 7th Central Pay Commission.
Why the timing matters
The announcement has landed just ahead of Diwali, when spending on travel, gifts and household purchases typically rises. For pensioners on fixed incomes in particular, even a few hundred rupees a month can make a visible difference, and the arrears payment adds a lump sum at a useful moment.
DA is normally revised twice a year, with effect from January 1 and July 1, and the announcement for the July instalment often comes a few months later, with arrears.
Other decisions taken by the Cabinet
The DA hike was one of four major decisions announced by Vaishnaw after Wednesday’s Cabinet meeting. The others were aimed more at manufacturing and rural governance than at household pay.
The Cabinet cleared the Pradhan Mantri Viksit Gram Swaraj Yojana, with an outlay of Rs 7,395.55 crore over 2026-27 to 2030-31, to help more than 2.55 lakh panchayats prepare development plans. Two manufacturing schemes were also approved, one for container manufacturing and one for sports goods.
What employees and pensioners should do now
There is no application to file for this increase. It applies automatically to eligible central government employees and pensioners, and departments are expected to apply the revised rate in their payroll and pension systems.
Still, it is worth keeping an eye on the next pay slip or pension credit. Check that the DA or DR percentage shown is 63 per cent, and that arrears from July have been included. If the revised rate does not appear after the next payment cycle, raise it with the drawing and disbursing officer or the pension disbursing bank, with the pay slip in hand.
Frequently asked questions
How much has DA increased?
DA and DR have increased by 3 percentage points, from 60 per cent to 63 per cent of basic pay or basic pension.
From when is the hike effective?
The hike is effective from July 1, 2026. Arrears from July are due along with the revised payment.
Who will benefit?
About 48.54 lakh central government employees and 68.71 lakh pensioners, more than 1.17 crore people in all.
Do employees need to apply for the hike?
No. The revised rate is applied automatically through payroll and pension systems. Employees and pensioners only need to check their pay slip or pension credit.
Wednesday’s decision will not change anyone’s basic pay, but for crores of households it changes what lands in the account each month.
