New Delhi | October 1, 2025

The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved a 3 per cent increase in Dearness Allowance (DA) for Central government employees and Dearness Relief (DR) for pensioners. The decision, aimed at offsetting the impact of rising prices, will come into effect from October 1, 2025, according to an official release from the Press Information Bureau (PIB).

With this revision, the DA and DR will now stand at 58 per cent of basic pay and pension, up from the current level of 55 per cent. The hike will directly benefit 49.19 lakh serving employees and 68.72 lakh pensioners, making the total number of beneficiaries close to 117.91 lakh individuals.

Financial Impact on Exchequer

The combined financial burden on the government due to this increase is estimated at ₹10,083.96 crore per annum. Officials noted that this additional expenditure was necessary to ensure that employees and retirees are protected against the effects of inflation.

This revision follows the established formula recommended by the 7th Central Pay Commission, which takes into account the rise in the All-India Consumer Price Index. The formula is designed to ensure that salaries and pensions are periodically adjusted to match the rising cost of living.

Recent DA Revisions

Earlier this year, in March 2025, the Union Cabinet had approved a 2 per cent hike in DA, raising it to 55 per cent with effect from January 1, 2025. The latest announcement marks the second revision of the year, further boosting the income of government employees and pensioners.

Who Will Benefit

Central Government Employees: Nearly 49.19 lakh serving employees will see an increase in their monthly salaries from October onwards.

Pensioners: Around 68.72 lakh retired government employees will receive enhanced Dearness Relief.

Total Beneficiaries: A combined 117.91 lakh individuals stand to gain from this Cabinet decision.

Purpose of the Hike

The government explained that the decision was taken as part of its commitment to provide relief to its employees and pensioners from the adverse effects of price rise. Inflation has been a key concern in recent months, and the DA/DR revision acts as a mechanism to preserve the real value of income.

Wider Context

Dearness Allowance is an essential component of salaries and pensions, adjusted twice a year—typically in January and July. It is calculated to cushion the impact of inflation on employees’ purchasing power. By revising the DA in line with inflation data, the government ensures fair compensation and maintains morale within the public workforce.

The move also underscores the government’s recognition of the contribution made by both its current workforce and retirees. With over 11 crore citizens directly or indirectly affected by these periodic hikes, the impact is significant not only on household incomes but also on consumption trends across the economy.

The Cabinet’s latest approval will be welcomed by millions of families dependent on government salaries and pensions, especially ahead of the upcoming festive season, when household expenses generally rise.

 Cabinet Approves 3% DA Hike for Govt Employees and Pensioners

The Union Cabinet has cleared a 3% hike in Dearness Allowance and Dearness Relief for central government employees and pensioners, effective October 1, 2025. With this revision, DA and DR now stand at 58% of basic pay and pension. The move will benefit over 117.91 lakh people, including 49.19 lakh employees and 68.72 lakh pensioners. The financial impact on the exchequer is estimated at ₹10,083.96 crore annually. The hike, based on the 7th Central Pay Commission formula, comes as part of the government’s effort to offset inflation and protect household incomes.