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The Union government has officially clarified that there are no plans to merge Dearness Allowance (DA) or Dearness Relief (DR) with basic pay. This statement has come at a crucial time, especially as discussions around the 8th Pay Commission gain momentum. Many employees had expected that rising inflation and the upcoming pay revision could lead to a merger of DA with basic pay from 2026. However, the government’s stance makes it clear that the current system will continue unchanged for now.

The clarification came from Minister of State for Finance Pankaj Chaudhary, who confirmed that the 8th Central Pay Commission has already been formally notified. He also stated that there is no proposal to merge DA/DR with basic pay at present. DA and DR will continue to be revised twice a year, based on the AICPI-IW inflation index, as per existing norms.

No Merger of DA–DR: What It Means for Employees and Pensioners

Earlier speculation suggested that from 2026 onwards, the government might stop revising DA and DR separately and instead merge them into basic pay as part of the new pay scale under the 8th Pay Commission. However, the government’s fresh statement ends all such assumptions.

For central government employees and pensioners, this means:

• DA and DR will continue to be revised every six months

• There will be no merger with basic pay for now

• Current salary structure remains unchanged

While the continuation of DA revisions is good news, the decision not to merge DA with basic pay has long-term implications. Elements like HRA, PF, NPS contribution, gratuity and pension calculations depend directly on basic pay. When DA is not merged, these key components do not get the benefit of a higher base. As a result, employees’ overall earnings do not see significant growth, even when DA rises periodically.

This makes the role of the 8th Pay Commission even more crucial, since major salary restructuring can now happen only through the Commission’s recommendations.

Current DA–DR Status

At present, central government employees and pensioners receive 55% DA/DR, after a 3% hike announced before Diwali.
DA is paid to serving employees, while DR is given to pensioners.
Over 50 lakh employees and 65 lakh pensioners will be directly affected by the 8th Pay Commission’s recommendations.

When Will the 8th Pay Commission Be Implemented?

The government announced the 8th Central Pay Commission earlier this year as the 7th Pay Commission completes its 10-year cycle.
The new Commission, headed by Justice (Retd.) Ranjan Desai, is expected to submit its report within 18 months.

Ideally, the 8th Pay Commission should take effect from 2026, but reports indicate that the implementation could get delayed due to:

• delays in appointments

• lack of clarity in the Terms of Reference (ToR)

• the lengthy review and approval process

Some estimates suggest a delay of up to two years.

Concerns Over the ToR

Employee unions have raised objections regarding the Terms of Reference, stating that:

• The ToR does not clearly include 69 lakh pensioners

• The implementation date is missing

• Past Commissions included this clarity upfront

Unions have demanded amendments, but the government has not yet commented.

Fitment Factor: What Increase Can Employees Expect?

The fitment factor plays a major role in determining revised pay scales.
According to NC–JCM (staff association) representatives, the 8th Pay Commission may recommend a structure similar to the 7th CPC.

A report by Ambit Capital suggests the fitment factor could fall between 1.83 to 2.46.

This implies:

• 1.83 factor → Minimum salary may rise to approx. ₹32,940

• 2.46 factor → Minimum salary may reach approx. ₹44,280

Thus, employees may see a significant rise in basic salary depending on the final recommendation.

Expected Salary Hike Under the 8th CPC

Ambit’s analysis indicates that the combined increase in Basic Pay + DA could range from 14% to 54%.
However, the upper extreme is unlikely, as a steep hike would impose a heavy fiscal burden on the government.
Still, a moderate yet meaningful revision is expected, and analysts believe the government might consider using salary increases as a way to boost consumption.

Several calculations based on fitment factors of 1.92 and 2.57 have also been prepared for grade pays such as 1900, 2400, 4600, 7600 and 8900. These include allowances like HRA (24%), Transport Allowance (₹3,600–₹7,200), NPS (10% of basic), and existing CGHS charges.