Dearness allowance: Union Cabinet approves 3% DA, DR hike ahead of Diwali 2026; check details

With this hike, the rate of DA and DR offered to employees and pensioners respectively has reached 63% of basic pay.

The decision on DA hike ahead of Diwali on November 8 will reach beneficiaries with arrears since July 1, 2026.

The increase, effective retrospectively from July 1, 2026, will benefit over 1 crore people, roughly 48 lakh serving employees and 68 lakh pensioners, across ministries. It will also cost the government around ₹10,000 crore.

Because the revision takes effect from July, employees and pensioners will also receive arrears for July, August, September and October, credited along with the October salary. That means the higher monthly rate and the accumulated arrears will land in the same payment, giving households a one-time cash inflow ahead of the Diwali festival.

"The Union Cabinet chaired by the Prime Minister Shri Narendra Modi today has approved to release an additional instalment of Dearness Allowance (DA) to Central Government employees and Dearness Relief (DR) to pensioners w.e.f. 01.07.2026 representing an increase of 3% over the existing rates of 60% of the Basic Pay/Pension, to compensate against price rise," the Union Cabinet said in a release.

"The combined impact on the exchequer on account of increase in both Dearness Allowance and Dearness Relief would be Rs.10,016.10 crore per annum. This will benefit about 48.54 lakh Central Government employees and 68.71 lakh pensioners," it added.

According to 7th Pay Commission recommendations, DA is calculated as a percentage of basic pay and is revised twice a year, in January and July, on the basis of the All India Consumer Price Index for Industrial Workers. It is paid in cash and is fully taxable, unlike some other allowances. Dearness relief for pensioners works the same way on basic pension.

The previous DA instalment was notified earlier this year with effect from January 1, 2026.

With consumer price inflation running above the Reserve Bank's 4% target for several months, another DA review is due in January 2027. CPI inflation stood at 4.82% in August, and the central bank now projects 5.2% for the full year.