The Union Cabinet on Saturday approved a 2 per cent increase in Dearness Allowance (DA) for central government employees, raising it from 58 per cent to 60 per cent.
The hike also applies to Dearness Relief (DR) for pensioners, which has similarly been increased from 58 per cent to 60 per cent.
According to a Cabinet release, the revised rates will be effective from January 1 this year. This means central government employees and pensioners will receive arrears.
The decision is expected to have an annual financial implication of Rs 6,791 crore for the exchequer.
The move is aimed at offsetting inflation and is expected to benefit around 49.19 lakh central government employees and 68.72 lakh pensioners.
Dearness Allowance is a cost-of-living adjustment provided to government employees and pensioners to cushion the impact of inflation on fixed incomes.
It is calculated as a percentage of basic pay and is revised periodically based on inflation indices to help maintain purchasing power.
The allowance is typically revised twice a year, in January and July, and is linked to the Consumer Price Index for Industrial Workers (CPI-IW), released by the Labour Bureau under the Labour Ministry.
The last revision was approved in October 2025, when the Union Cabinet, chaired by Prime Minister Narendra Modi, cleared a 3 per cent increase in DA and DR.
That hike raised the rate from 55 per cent to 58 per cent, with effect from July 1, 2025, and carried an annual financial implication of Rs 10,083.96 crore.
