Big news for central government employees. The 8th Pay Commission’s recommendations are set to be handed over to the Central Government soon. The new commission will kick off its work in April, raising hopes for a salary and allowance revision for central government employees and pensioners. The implementation of these recommendations is key, and the most significant change will be in the dearness allowance.
For central employees, the dearness allowance will reset to zero. This means that once the new pay commission is put into action, the calculation for dearness allowance will start fresh from zero.
Looking ahead, it’s projected that by January 2026, the dearness allowance (DA) could hit 61 percent. According to the rules, when the new pay commission’s recommendations are put into effect, the DA for employees will be set to zero and combined with their basic salary. This will be the case with this pay commission as well. However, there’s talk that only 50 percent of the DA might be merged into the basic salary, leaving the remaining 11 percent out of the merger. But nothing has been finalized yet, and the government hasn’t provided any solid reasoning. Ultimately, it will hinge on the new commission’s recommendations.
Once the 8th Pay Commission is implemented, the DA will be recalculated based on the new basic salary for central employees, starting from zero. For example, if someone’s basic salary is Rs 34,200, their dearness allowance will be set to zero in January 2026. Then, in July 2026, a percentage (likely around 3-4 percent, depending on the DA) will be added. Further calculations will proceed from there. If the dearness allowance is reset to zero, it will also impact other allowances.Calculating Dearness Allowance (DA)
Once the 8th Pay Commission kicks in, the dearness allowance will be added to the basic salary. If the DA is 50% or higher, there’s a plan to merge it into the new pay structure. The DA is determined based on the Consumer Price Index (CPI), which fluctuates over time, affecting the DA amount. So, when the 8th Pay Commission is rolled out, incorporating the current DA into the basic salary will boost employees’ overall earnings.
For example, if an employee’s current basic salary is Rs 18,000 and the DA is 50%, that means the DA amounts to Rs 9,000. After the 8th Pay Commission is implemented, adding the DA to the basic salary would bring the total salary to Rs 27,000.
Why might the dearness allowance be zero?
When a new pay scale is introduced, the DA that employees receive is typically added to their basic salary. Experts suggest that ideally, 100% of the DA should be merged into the basic salary, but that doesn’t always happen due to financial constraints. This merging did occur back in 2016.
Looking back, when the sixth pay scale was introduced in 2006, employees were receiving a 187% DA under the fifth pay scale until December. At that time, the entire DA was incorporated into the basic salary, resulting in a coefficient of 1.87 for the sixth pay scale. A new pay band and grade pay were also established, but it took three years for everything to be finalized.
When will the dearness allowance hit zero?
Experts say that following the pay commission’s recommendations, it will take effect in January 2026 alongside the 8th Pay Commission. At that point, the dearness allowance will drop to zero. This means that the allowance will only be recalculated from that zero point.
In other words, the AICPI index from January to June 2026 will determine if the dearness allowance will be set at 3 percent, 4 percent, or some other amount. Once this situation is clarified, employees will receive a dearness allowance above 0 percent.