Dearness Allowance (DA) and Dearness Relief (DR) are a part of the basic salary of central government employees and pensioners. Its objective is to reduce the impact of rising inflation and to provide relief to the household expenses of the employees. When DA and DR increases, the salary and pension in the hands of government employees and retirees increases. This helps in managing expenses amid rising inflation.
Usually DA is changed twice a year, for January and July. It is announced in March and October. This decision is taken on the basis of All India Consumer Price Index (AICPI). DA was last increased in April 2026. Then the Finance Ministry had increased it from 58% to 60% of the basic salary, which came into effect from January 1, 2026.
Why is Pay Commission made every 10 years?
Prime Minister Narendra Modi constituted the 8th Pay Commission in January 2025. Its terms and conditions were released in November 2025. This commission is being headed by former Supreme Court judge Ranjan Prakash Desai. Its other members include Professor Pulak Ghosh and former IAS officer Pankaj Jain. Central Pay Commission (CPC) is formed every 10 years so that changes can be made in the salary, allowances and pension of government employees. The Commission decides the new salary and pension structure after taking suggestions from employee organizations, ministries and pension institutions.
Why is DA important?
DA is an important part of the salary of government and public sector employees. Its purpose is to compensate for the increasing expenses due to inflation. According to government data, retail inflation in April 2026 stood at 3.48%, while food inflation reached 4.20%. Along with the increase in the prices of milk, vegetables and everyday items, the expenses of petrol, diesel, CNG and electricity are also continuously increasing. In such a situation, increasing DA provides relief to the middle class, low income families and those who travel daily. Due to rising prices of crude oil, transport expenses and inflation of food items, DA is now expected to increase again in July 2026.
How is DA decided?
Under the 7th Pay Commission, DA increase is decided on the basis of 12 month average data of AICPI. DA has increased 10 times since 2021. The biggest increase was 11% in July 2021. The latest increase in April 2026 was 2%.
Who gets the benefit of increase in DA and DR?
The benefit of DA and DR is available to about 50 lakh central government employees and about 65 lakh pensioners. Retired employees of defense and railways are also included in this. Private companies in India generally do not give DA and DR to their employees or retired people.
Is there tax on DA?
DA is a part of the employee’s CTC i.e. total salary package and is given every month along with the salary. According to income tax rules, DA is completely subject to tax. Employees have to show DA information separately in their Income Tax Return (ITR).
