The calculation of the dearness allowance is based on the Consumer Price Index for Industrial Workers (CPI-IW). This data is released monthly by the Labour Bureau. The government uses a specific formula, determined by the 7th Pay Commission, based on the average CPI-IW for the previous 12 months.
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7th Pay Commission: Good news is on the horizon for central government employees this Diwali. According to media reports, the central government may announce the hike in Dearness Allowance (DA) for July 2025 around the time of Diwali. Currently, employees receive 55% DA on their basic pay. If the government approves the proposed 3% increase, the DA will rise to 58%. It’s worth noting that if this decision is implemented, more than 5 million central government employees and 6.5 million pensioners will benefit.
The details are as follows:
Experts believe that the chances of a DA hike this time are high, given the recent decline in inflation rates. The government typically revises the DA every six months (in January and July) based on the inflation rate.
How is Dearness Allowance (DA) calculated?
The Dearness Allowance is calculated based on the Consumer Price Index for Industrial Workers (CPI-IW). This data is released monthly by the Labour Bureau. The government uses a specific formula, determined under the 7th Pay Commission, based on the average CPI-IW for the previous 12 months: DA (%) = [(Average CPI-IW of 12 months – 261.42) ÷ 261.42] × 100
(Here, 261.42 is the average CPI-IW based on the 2016 base year, which was used as the benchmark by the 7th Pay Commission.)
Impact on Employee Salaries
If a 3% DA increase is implemented, an entry-level employee (with a basic pay of ₹18,000) who previously received ₹9,900 as DA (55%) will now receive ₹10,440 (58%), an increase of ₹540 per month. Similarly, an employee with a monthly salary of ₹30,000 (whose basic pay is also ₹18,000) who previously received ₹9,900 as DA will now receive ₹10,440, an increase of ₹540 per month, or approximately ₹6,480 annually.
