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The central government has recently announced a 2% increase in dearness allowance (DA) for central employees, after which it has now increased to 55% of the basic salary. This increase is the last DA growth to be implemented under the Seventh Pay Commission. But the question is whether the DA will be mixed in the basic salary with the Eighth Pay Commission to be implemented in 2026? The opinion of experts on this subject and demands of employee organizations remain the center of discussion. Come, let’s understand this issue deeply.

Increase in DA and its importance

The central government reviews dearness allowance every six months, so that employees can get relief from increasing inflation. The DA has been extended up to 55% under the recent announcement, which will be effective from July 2025. This increase is based on the All India Consumer Price Index (AICPI), which reflects the cost of living. Based on this index, the DA is calculated by the Labor Bureau every month. This system helps in providing economic stability to employees, but will this DA now become part of the basic salary?

What do experts say?

Financial and legal experts believe that the discussion of merging DA into basic salary is still limited to speculations only. According to Ajay Rajvi, managing partner of Accord Juris, it is too early to take any such decision. The government has not taken any official step in this direction at the moment. Significantly, the sixth and seventh pay commissions opposed the merging DA to the original salary. However, employee organizations such as the National Council of Joint Consultative Machinery have been raising this demand for a long time.

Minister of State for Finance Pankaj Chaudhary made it clear in the Rajya Sabha that the government currently had no intention of mixing the DA in the basic salary. This decision will not apply as interim relief even after the recommendations of the Eighth Pay Commission. This may shock the expectations of the employees, but experts say the final recommendations of the Eighth Pay Commission can show a new way in this direction.

Eighth Pay Commission: Will it change?

The Eighth Pay Commission will be applicable from January 1, 2026, and the method of calculating DA under it is not yet clear. Kochhar & Ko. Partner Suma RV says that the calculation system of the Seventh Pay Commission can also be continued in the Eighth Pay Commission unless a new formula is proposed. According to experts, DA calculation may be based on the All India Consumer Price Index (AICPI-IW), whose current base is 2016.

However, the possibility of change in the base year cannot be ruled out in view of rising inflation and changing consumption patterns. Nisarg Desai of Gandhi Law Associates states that the base year is updated from time to time so that it remains in line with economic conditions. This change can make the calculation of DA more effective.

Employees’ demand and future possibilities

Many employee organizations are demanding to merge the DA in the basic salary, as in the fifth pay commission. At that time, it was included in the original salary when the DA exceeded 50%. But the sixth and seventh pay commission did not adopt this policy. A Supreme Court lawyer says that only the recommendations of the Eighth Pay Commission will decide what the future of DA will be. No concrete information is available yet, and employees will have to wait for the government’s final decision.