Cabinet okays 4% DA hike for staff; outgo pegged at ₹12,900 crore

The union cabinet on Thursday approved the release of an additional instalment of dearness allowance (DA) to central government employees and dearness relief (DR) to pensioners to compensate against price rise.

This would translate into a four percentage points increase in dearness allowance (DA) to 50% of basic pay from the existing rate of 46% effective from January 1 this year, benefitting over 10 million employees, commerce and industry minister Piyush Goyal said after a meeting of the cabinet chaired by Prime Minister Narendra Modi.

The combined impact on the exchequer on account of both DA and DR would be Rs 12,869 crore per annum. The impact would be Rs 15,014 crore during the year 2024-25 (January 2024 to February 2025).


With the increase in DA, transport allowance, canteen allowance, and deputation allowance among others have been increased by 25%. House rent allowance has been raised to 30%, 20% and 10% of basic pay, respectively, from 27%, 19% and 9%, respectively.

Benefits under gratuity have been increased by 25% with an increased ceiling of Rs 25 lakh against the existing Rs 20 lakh.

The burden on the exchequer due to an increase in various allowances would be Rs 9,400 crore annually.

The increase in DA and DR is in accordance with the accepted formula, and is based on the recommendations of the 7th Central Pay Commission.

The decision is likely to benefit 4.92 million central government employees besides 6.79 million pensioners.