Recently, the Modi government at the Center had increased the dearness allowance (DA) of central employees and pensioners by 2 per cent, after which the DA increased from 53 per cent to 55 per cent. The new rates have been made effective from January 2025. Now the next DA increase is to be done in July 2025, which will depend on the CPI-IW index data released from January to June released by the Ministry of Labor.

It is expected to be announced around October 2025. However, this amendment to DA may be the last as the 8th Pay Commission is likely to be implemented from 1 January 2026. Therefore, government employees and pensioners need to know what is going to happen next.

Central employees’ dearness allowance increases twice a year

The central government amends dearness allowances and relief rates of employees and pensioners twice a year. The amendment takes place in January and July based on the AICPI index’s half-year (January to June/July to December) data. These figures are released on 30 or 31st of every month. Employees are given dearness allowance to give relief from rising inflation.

How much dearness allowance can increase in July 2025

The CPI-IW index data of January, February and March has so far been released by the Ministry of Labor. In January 2025, the AICPI index was 143.2, but in February AICPI-IW fell 0.4 points to 142.8. However, in March it rose by 2 points to reach 143.0, leading to the DA score to 57.06%. The figures of April, May and June are yet to come, after which it will be decided how much DA will increase from July 2025.

If this trend continues and AICPI points jump in the next 3 months and the DA score crosses 58%, then an increase of 3% can be expected. But if the digits decline, DA may increase by up to 2% like January. So employees will have to wait a little for the next increase.

How much DA can increase from 55% in July 2025

In July 2025, DA is expected to increase from 55% to 57% or 58%! However, there is no official confirmation yet. For example, if the basic salary of an employee is ₹ 18,000, then at 57% DA it will be ₹ 10,260 and at 58% DA it will be ₹ 10,440. This increase will increase the take-home salary of employees.

How is dearness allowance calculated?

There is a certain formula for calculating dearness allowance of central employees and pensioners. This formula is as follows:

7th CPC DA% = [{पिछले 12 महीनों के लिए एआईसीपीआई-आईडब्ल्यू (आधार वर्ष 2001=100) का 12 महीने का औसत – 261.42}/261.42×100]

This formula will apply to those central government employees and pensioners who receive salary based on the recommendations of the 7th Pay Commission.

For example:

DA% = (392.83-261.42) /261.42 school = 50.26

The average CPI-IW of the last 12 months is 392.83. According to Formula, DA is 50.28% of the basic salary. Therefore, the central government can increase dearness allowance by 50%, ignoring decimal marks by 50%.