Centre raises DA and pensioners' DR by 3 percentage points to 63%

The Union Cabinet has approved an additional three percentage point increase in Dearness Allowance for Central Government employees and Dearness Relief for pensioners. The revision takes the rate from 60% to 63% of basic pay or pension and is effective from July 1, 2026.

According to the government, the combined annual impact on the exchequer will be ₹10,016.10 crore. About 48.54 lakh Central Government employees and 68.71 lakh pensioners are expected to benefit. The revision follows the accepted formula based on the recommendations of the Seventh Central Pay Commission.

Dearness Allowance and Dearness Relief are intended to partly offset the erosion of purchasing power caused by inflation. They are revised periodically rather than functioning as a permanent increase in basic pay. Because the rate is calculated as a percentage of basic pay or pension, the rupee benefit varies by employee or pensioner.

The fiscal impact is relevant because recurring compensation changes affect government revenue expenditure, while the household impact can support disposable income for a large group of salaried employees and pensioners. The macroeconomic effect, however, is much smaller than the headline beneficiary count might suggest and depends on how much of the additional income is spent rather than saved.