Central government employees and pensioners have been waiting for updates on the 8th Pay Commission but that will take more time. For now there is some good news  a new increase in Dearness Allowance (DA) is likely to be announced before Diwali according to media reports. This hike is expected to benefit more than 1.2 crore employees and pensioners giving them extra money to spend during the Dussehra and Diwali festivals. Currently central government staff get 55 per cent DA. Experts believe there could be another 3 per cent rise keeping in line with inflation. DA is revised twice every year: once from January and again from July. For July 2025 analysts expect the increase to be 3-4 per cent. Although the official announcement usually comes months later around February-March or September-October the hike is always applied retrospectively from January and July. This system helps employees and pensioners manage the rising cost of living. What this means for Salaries and Pensions The DA hike will directly raise the monthly income of more central government employees and pensioners. For example if someone’s basic salary is Rs. 50000 they would get about RS. 3000 more every month after the hike. Pensioners will also see an increase through Dearness Relief (DR) which is linked to DA helping them maintain their purchasing power. How is DA hike calculated? The DA hike is not random it follows a fixed formula based on the Consumer Price Index for Industrial Workers (CPI-IW) which is tracked every month by the Labour Bureau. Under the 7th Pay Commission the Dearness Allowance (DA) is calculated using the average of the Consumer Price Index for Industrial Workers (CPI-IW). The base year for this calculation is 2016 with the reference index set at 261.42. This method links DA directly to inflation ensuring that employees receive some financial protection against rising prices. For instance an entry-level central government worker with a basic salary of Rs. 18000 currently gets Rs. 9990 as DA at 53 per cent. If DA goes up by 3 per cent the allowance would rise to Rs. 10440 giving the employee an additional Rs. 540 per month. For those with higher basic pay the monthly increase would be even larger. Effective date and payment of arrears The DA hike though announced in September will take effect from July 1 2025. This means employees and pensioners will receive arrears for July August and September which will be paid out in October along with their regular salary or pension. This lump sum payout arriving just before Navratri and Diwali will be a welcome boost for many households helping them manage festive expenses more comfortably.