This is one of those things most people in the central government service and pensioners await madly-the granting of the 18 months’ arrears of Dearness Allowance (DA) kept on hold during the COVID period. The festival remains 3% DA hike due from July 2025 with the 8th pay commission being in full swing. This article tells of the current situation of arrears, recent DA hikes, and steps to quicken payments.
Status of 18-Month DA Arrears
Due to the COVID-19 crisis (January 2020-June 2021), the government froze three DA hikes amounting to 11%, affecting over 1 crore employees and pensioners. While the hikes withheld were from 17 to 28 percent, unions like National Council-JCM rose in demand for the arrears, saying funds should be paid. The Finance Ministry had, however, refused to make any payment of arrears citing efforts for fiscal recovery. On the eve of a Lok Sabha response on July 29, 2025, the refusal was reiterated. With non-payment of these arrears, the employees trust for immediate relief on the next DA hike.
Latest DA Hike Update
Last DA increase was understood as a hike of 3% that would take the percentage of DA from 56% to 59% and would be announced by October 2025, but will be effective from July 1, 2025. Against the backdrop of an All India Consumer Price Index (AICPI) rising to 144.2 in June, the increase will further enhance the earnings of an employee by ₹540 if his annual basic salary is ₹18,000 and an expenditure of ₹1,500 if his gross salary is ₹50,000 in one month. Arrears for July to September 2025 will accompany salaries for October, thereby increasing flashy expenditures. These increases will also boost the Dearness Relief to pensioners by 3%, with their pensions going up by ₹270 to ₹1,000 per month.
Needless to say, how the hike in DA may alter salaries and economic conditions
With this DA increment, various allowances such as HRA (upto 30% in Metro cities) and Transport Allowance (₹1,350-₹7,200) will also witness an increase. Gross pay for a basic salary of ₹18,000 may increase to ₹25,920 with arrears at ₹1,620. This is a real bonus of ₹12,000 crore annually for retail and room service industries, particularly during the time of Diwali. However, with the advent of the 8th Pay Commission from January 2026, DA shall be reset to zero, henceforth merged in basic pay, thus softening up the further gains.
Context of the 8th Pay Commission
The 8th Pay Commission was constituted on January 16, 2025, to revise salaries from January 2026, and their report was due for submission by the late months of 2025. A fitment factor ranging between 1.92 and 2.86 was being discussed, which would increase the lowest basic pay from ₹18,000 to somewhere between ₹34,560 and ₹51,480. This DA hike, likely to be the last one under the 7th Pay Commission, would thus herald the transition to the new pay structure; however, the unions argue that the fitment factor should be higher to adjust for the inflation of 5.2% in 2024.
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