The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved an additional 3% hike in Dearness Allowance (DA) for Central Government employees and Dearness Relief (DR) for pensioners.
This increase comes as a timely Diwali gift, aimed at helping employees and pensioners cope with rising prices.
The revision, effective from July 1, 2025, takes the DA rate from 55% to 58% of basic pay and pension. The move comes as part of the government’s effort to cushion its employees and pensioners against the rising cost of living.
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This marks the second increase in DA this year. In March 2025, the Cabinet announced a 2% hike, raising the payout from 53% to 55% of basic pay. Before that, a 3% hike was implemented in October 2024.
DA Is Revised Biannually
DA is revised biannually in line with the movement of the Consumer Price Index for Industrial Workers (CPI-IW), which is published every month by the Labour Bureau.
The latest hike will impact nearly 49.19 lakh Central Government employees and 68.72 lakh pensioners. The combined cost to the exchequer is estimated at Rs 10,083.96 crore annually.
For employees drawing the minimum basic salary of Rs 18,000 under the 7th Pay Commission, the 3% increase translates into an additional Rs 540 per month, taking their salary to Rs 28,440.
Pensioners receiving the minimum pension of Rs 9,000 will see a rise of Rs 270, lifting their pension to Rs 14,220 per month.
Productivity Linked Bonus For Railway Employees
In addition to the DA hike, on September 24th, the Cabinet also cleared the payment of Productivity Linked Bonus (PLB) for railway employees.
A bonus equivalent to 78 days’ wages has been approved for the year 2024–25, benefitting nearly 10.91 lakh non-gazetted railway staff. The total financial implication of this decision stands at Rs 1,865.68 crore.
The maximum PLB payable per eligible employee has been fixed at Rs 17,951.
The bonus will be disbursed to a wide range of categories, including Track Maintainers, Loco Pilots, Train Managers (Guards), Station Masters, Technicians, Supervisors, Ministerial Staff, and other Group ‘C’ employees.
The payment is traditionally made ahead of Durga Puja and Dussehra to serve as both a festive gift and an incentive for performance.