- The Union Cabinet approved a 3% hike in dearness allowance for central employees and pensioners
- About 48.54 lakh employees and 68.71 lakh pensioners will get higher monthly payouts and arrears
- DA hikes reduce the real raise from the 8th Pay Commission's fitment factor for salary revisions
Central government employees received their much-awaited Diwali bonanza on Wednesday, as the Union Cabinet approved a 3% hike in dearness allowance. Simultaneously, the dearness relief for pensioners was also raised equally.
The increase applies retrospectively from July 1, 2026, and takes the cumulative DA and DR to 63% of the basic pay and basic pension, respectively.
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For about 48.54 lakh employees and 68.71 lakh pensioners, that means a slightly larger monthly payout and four months of arrears. It also means something less visible. Every point of DA added now is a point the 8th Pay Commission's fitment factor must first absorb before it produces a real raise.
Take a Level 1 employee on the entry basic pay of Rs 18,000. Their DA rises from Rs 10,800 to Rs 11,340, an increase of Rs 540 a month. Arrears for July to October come to Rs 2,160.
The government estimates the combined cost of the DA and DR increase at Rs 10,016.10 crore a year. This is the second revision of 2026. In April, the Cabinet raised DA from 58% to 60%, effective January 1.
How DA Eats Into The Fitment Factor
When a new pay commission's award takes effect, accumulated DA is set back to zero and folded into a new, higher basic pay. The fitment factor is the multiplier that converts old basic pay into new basic pay.
Part of that multiplier does no more than replace the DA an employee already earns. Only what is left over is a real increase.
The 7th Pay Commission showed this split itself. DA stood at 125% when its award took effect on January 1, 2016. Of its 2.57 fitment factor, 2.25 accounted for that DA. The remaining portion translated into a real increase of roughly 14%.
At 63% DA, an employee today draws 1.63 times their basic pay as basic plus DA. Any fitment factor below 1.63 would therefore cut take-home basic pay. The first 1.63 of any factor merely keeps it where it is.
ALSO READ | 8th Pay Commission: Why Salary Arrears Matter For India's FY28 Consumption
What Different Fitment Factors Buy Now
The table compares a Level 1 employee's current basic plus DA (Rs 29,340 at 63%) with the new basic pay under fitment factors that have featured in the debate.
| Fitment factor | New basic pay, Level 1 (Rs) | Gain over current basic + DA (Rs/month) | Real raise at 63% DA |
|---|---|---|---|
| 1.86 | 33,480 | 4,140 | 14.1% |
| 2.57 | 46,260 | 16,920 | 57.7% |
| 2.86 | 51,480 | 22,140 | 75.5% |
| 3.00 | 54,000 | 24,660 | 84.0% |
| 3.833 | 68,994 | 39,654 | 135.2% |
Current basic + DA for Level 1: Rs 29,340 (Rs 18,000 basic + 63% DA). Real raise = fitment factor ÷ (1 + DA rate) − 1. Basic pay and DA only; HRA, transport allowance and other allowances excluded. Calculations by NDTV Profit.
Wednesday's three-point increase trims between 2.2 and 4.4 percentage points off the real raise at each of these factors, compared with the 60% rate. The higher the factor, the bigger the trim.
To simply match the roughly 14% real raise of the 7th Pay Commission, the 8th Pay Commission would now need a factor of about 1.86 (1.63 × 1.143). Before Wednesday's hike, about 1.83 would have done.
The benchmark keeps moving. If the next instalment, due from January 2027, also adds three points, matching the 7th Pay Commission would take a factor of about 1.90.
Notably, the 8th Pay Commission, constituted in November 2025 under the chairpersonship of Justice (retd) Ranjana Prakash Desai, is holding consultations with several stakeholders. The panel was given an 18-month deadline to submit its report, which means that the recommendations are likely to be tabled before the government by May 2027.
ALSO READ | 8th Pay Commission: 14% Then, 140% Now? What Past Precedent Reveals About Current Salary Hike Demands
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