The Role of Dearness Allowance (DA) in Central Government Compensation
Dearness Allowance is a cost-of-living adjustment allowance granted to employees and pensioners twice every year (effective 1st January and 1st July) based on the 12-month average of the All India Consumer Price Index for Industrial Workers (AICPI-IW).
How DA Merger Operates During a Pay Commission Overhaul
As of late 2024 / 2025, Central Government DA reached 53%. During a decennial Pay Commission transition, the following sequence occurs:
- Absorption into Basic: The entire accumulated DA (53%+) is merged into the new basic salary structure via the fitment factor.
- DA Reset to 0%: On the effective date of the 8th CPC (e.g. January 1, 2026), Dearness Allowance is reset to 0%.
- New AICPI Base Year: The Ministry of Labour recalculates inflation increments against a revised AICPI base index.
- Subsequent DA Hikes: After 6 months (typically July 2026), the first round of 8th CPC DA (typically 3% to 4%) begins accruing on the newly elevated basic pay.