The DA of central government employees has increased by 2 percent. On Friday, the Union Cabinet has approved the proposal related to this. With this, their DA has become 55% of their basic salary. The recommendations of the 8th Pay Commission will be implemented from January next year. The question is, will the DA of the employees be merged with their basic salary from next year?
The central government has approved a 2% increase in the dearness allowance (DA) of its employees. With this, the DA of central employees has become 55% of their basic salary. The government changes the DA of its employees twice a year. The next DA revision will be announced in November which will come into effect from July. This will be the last DA revision under the 7th Pay Commission. The government has announced the formation of the 8th Pay Commission, whose recommendations will come into effect from January 1, 2026. The question is, will the DA of the employees be merged with their basic salary from next year? The 5th Pay Commission had merged DA into the basic salary because at that time it had become more than 50%. But this did not happen after that. Now such speculations are being made whether DA will be merged into the basic salary before the 8th Pay Commission comes.
According to an ET report, Ajay Rajvi, Managing Partner of Accord Juris, says that it is too early to say this right now. There is no official information about merging DA into the basic salary. The 6th Pay Commission had opposed the merger of DA into the basic salary. The same was considered in the 7th Pay Commission as well. Many employee organizations are demanding the merger of DA into the basic salary. These include the National Council of Joint Consultative Machinery. Minister of State for Finance Pankaj Chaudhary has told in a written reply in the Rajya Sabha that at present there is no plan to merge DA into the basic salary. The government will not merge 50% of DA into the basic salary. This will not be done even as interim relief before the report of the 8th Central Pay Commission comes.
How will the calculation be done
Nisarg Desai, partner, Gandhi Law Associates, says, ‘DA is designed to deal with inflation. Its rates are revised every six months. This shows how much is the cost of living. The 6th Pay Commission also recommended the same. The Labor Bureau releases the All India Consumer Price Index (AICPI) every month. It is effective from September 2020. If DA is not merged into the basic salary, its calculation will continue on the basis of AICPI.’
Suma RV, partner, Kochhar & Co. Legal Consultants, said that central employees and pensioners will have to wait for the report of the 8th Pay Commission. The existing method of calculation under the 7th Pay Commission will continue in the 8th Pay Commission as well. Unless the 8th Pay Commission proposes a new basis and the government agrees to it. How will DA be calculated under the 8th Pay Commission? There is no official information yet on how DA will be calculated for central employees from January 1, 2026. It is also not known whether it will be based on the All India Consumer Price Index (AICPI-IW).
Base Year
Monica Tanna, partner, Singania & Co., explains that DA is usually calculated on the basis of AICPI-IW. It was the same in earlier pay commissions as well. But any change in this formula will be decided by the 8th Pay Commission and approved by the government. The base year for AICPI-IW is 2016. It is possible that it may be changed, as inflation is rising.
Therefore, the possibility of changing the base year for calculating AICPI-IW cannot be ruled out. Changes are made from time to time to reflect changing consumption patterns and economic conditions. Supreme Court of India advocate Sandeep Bajaj says that any change in methodology, base year or merging of DA into basic salary will depend on the recommendations of the 8th Pay Commission. These recommendations have not been finalised yet. Discussions about these possible changes are still theoretical. A formal policy decision is awaited from the government.
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