The 8th Pay Commission brings significant changes, especially to the dearness allowance (DA) for central government employees. With its implementation, the dearness allowance will reset to zero, paving the way for a new calculation framework.
The Central Government has officially approved the 8th Pay Commission, with plans to soon appoint a chairman and panel members. These developments will lead to deliberations on the revised pay structure and allowances for central employees and pensioners. However, the biggest change lies in the dearness allowance, which will reset to zero as soon as the new pay matrix comes into effect.
It is anticipated that by January 2026, the DA rate will rise to 63%. As per regulations, once DA exceeds 50%, it must be merged with the basic salary. However, the previous merger, despite surpassing 50%, was deferred. Discussions are now ongoing regarding whether the full 63% will be merged into the basic salary or only the standard 50%, leaving 13% unmerged. A final decision on this matter rests with the government.
When the 8th Pay Commission takes effect, central employees’ DA will restart at zero, recalculated based on the revised basic pay. For example, if an employee’s current basic salary is ₹34,200, their DA will be zero in January 2026. It will gradually increase from 3-4% in July 2026, with further adjustments made periodically thereafter.
The reset of DA to zero will also affect other allowances tied to the dearness allowance, leading to revisions across multiple benefits.
Dearness Allowance is determined using the Consumer Price Index (CPI), which fluctuates over time. Upon implementation of the new pay commission, DA will be recalculated and added to the basic salary. For instance, if the current basic salary of an employee is ₹18,000 and the DA stands at 50%, the DA amount would be ₹9,000. Once DA is merged with the basic salary, the total salary would rise to ₹27,000.
When a new pay scale is introduced, the DA accumulated by employees is integrated into the basic salary. Although the guidelines suggest merging 100% of DA into the basic, financial constraints often prevent this. Similar practices were followed during the implementation of the 6th and 7th Pay Commissions. For instance, in 2006, when the 6th Pay Commission was introduced, 187% DA was merged into the basic salary, resulting in a revised pay structure with new pay bands and grade levels.
Experts predict that the reset to zero will coincide with the implementation of the 8th Pay Commission in January 2026. Following this, DA will be recalculated based on the All-India Consumer Price Index (AICPI) for January-June 2026, which will determine the new rate (e.g., 3%, 4%, or more). Once finalized, employees will start receiving DA beyond 0%.
The upcoming changes highlight the evolving landscape of central government pay structures, with employees poised to benefit from adjustments under the new system.
