An increment of 2% in dearness allowance (DA) has been sanctioned by the Central Government, which brings respite to millions of employees and pensioners. This increase will lead to an increase in DA to 60%, which will take effect from 1st January 2026. The decision was made after the Cabinet meeting, and it was announced by Union Minister Ashwini Vaishnav.

Many people across the nation will benefit from this amendment. Approximately 5 million employees of the central government, as well as 6.9 million pensioners and family pensioners. This will increase their monthly income and provide them with financial relief amid inflation. The increase in DA will directly increase employees' monthly salaries and pensions. This increase will apply to all employees and pensioners covered under the 7th Pay Commission.

The primary purpose of dearness allowance (DA) is to protect employees' and pensioners' incomes from the effects of inflation. It is fixed as a percentage of basic salary and is revised twice annually. DA is calculated based on the Consumer Price Index for Industrial Workers (CPI-IW), which is released monthly by the Labor Bureau under the Ministry of Labor.

The central government last increased employees' dearness allowance and pensioners' dearness relief by three percent for Diwali. At that time (in October), DA was increased from 55% to 58%, effective July 1, 2025. The arrears of that increase were also paid to employees and pensioners, providing them with additional benefits.