DA hike: How is dearness allowance for govt employees calculated? We explain the formula
Here's what's trending across India right now:
DA for central government employees and pensioners is calculated using data from the AICPI index's 12-month average. ( Representative Image ) AI Quick Read Dearness Allowance (DA) is a percentage of the basic salary component for central government employees and pensioners which seeks to address rising cost-of-living. It is reviewed twice a year, new announcements are usually made annually in March and October, with rollouts in July the same year and January in the next year.
Adding to this, Over 1 crore rupees workers, comprising nearly 50 lakh central government employees and close to 65 lakh central government pensioners, including defence and railway personnel and retirees, benefit from the DA hikes and corresponding increase in Dearness Relief (DR).
Meanwhile, Notably, DA was last revised by 2% in April this year, taking it from 58% to 60% of basic salary, with effect from 1 January 2026. In the following months, the Indian Banks' Association ( IBA ) revealed revised DA and DR for workmen and officer employees across levels for the months of May, June and July 2026. And later, the Indian Railways also revealed a 2% DA and DR hike for its personnel.
Notably, Since then, multiple state governments have also increased DA and DR to close gaps in payment with the central government.
As per the latest buzz, DA hikes are calculated based using data from the 12-month average of the Labour Bureau's All India Consumer Price Index for Industrial Workers ( AICPI -IW), as prescribed by the 7th central pay commission (CPC).
In further updates, The index measures retail inflation by tracking fluctuations in the prices of goods and services consumed by industrial workers.The formula used is as follows, according to Clear Tax:
On top of that, Thus, the 2% DA hike revealed in April was calculated using the AICPI's 12-month average formula as follows:
DA percentage = (145.54 × 2.88 − 261.33) / 261.33 × 100
Source: mint