DA, DR hiked to 53%: Will DA, DR automatically merge into basic pay of central govt employees, pensioners now?

Dearness Allowance (DA) has recently been hiked by 3% to 53% for central government employees. Dearness relief (DR) has also been increased by 3% to 53% for the central government pensioners. The revised DA is effective from July 1, 2024. There have been speculations about whether DA and DR will be automatically merged into the basic pay component once DA crosses 53%. This is because a similar merger happened in the past when DA crossed this 50% threshold.

Will DA or DA merge into basic pay for the central government employees and pensioners?

Will DA or DR be automatically merged into basic pay now as it has crossed the 50%-mark? The answer is no. "The increased DA will not be included in a central government employee’s basic pay," says Debjani Aich, Partner, IndusLaw.

Sanjeev Kumar, Partner, Luthra and Luthra Law Offices, India says, "The 7th Pay Commission report did not recommend any such measure."


Vishal Gehrana, Principal Associate, Karanjawala & Co. and Advocate on Record, Supreme Court says, "In earlier systems like 5th Central Pay Commission, when DA touched 50%, it was merged with the basic salary to simplify wage structures and ensure that employees’ base pay reflected real-time inflation demands. This was seen as a way to avoid having DA rise indefinitely, which could create distortions in compensation systems, particularly as DA is often a larger percentage of pay than other components. However, this practice was discontinued under the 6th and 7th Central Pay Commissions, which took a more flexible approach to wage structure management."

Aich says, "This has been clarified by the Department of Expenditure (DoE) on October 21, 2024, through an office memorandum that stated that DA will continue to be a distinct element of remuneration and will not be included within the ambit of 'pay' as defined under the Fundamental Rules (FR) applicable to government employees."

Aich explains, "Under FR 9(21),'Pay' means the amount drawn monthly by a Government servant as (i) the pay, other than special pay or pay granted in view of his personal qualifications, which has been sanctioned for a post held by him substantively or in an officiating capacity or to which he is entitled by reason of his position in a cadre; (ii) overseas pay, special pay and personal pay; and (iii) any other emoluments which may be specially classed as pay by the President. DA has been clarified to be excluded from the overmentioned definition of 'pay' by the DoE. This approach is in broad consonance with the Code of Wages, 2019, where dearness allowance is a separate item in addition to an employee’s basic pay (and any retaining allowance)."

Will there be a change in the salary structures of central government employees now that DA reaches 53%?

Answering this, Gehrana says, "Under the 7th Central Pay Commission, the new system has evolved where crossing the 50% DA threshold does not automatically increase other allowances. Presently, the revision of these components is not attached directly to DA but is subject to a separate decision by the Government of India. In simple words, without an official notification or policy from the Government of India, there will be no modification to the allowances like HRA or TA, even if DA touches the 53% mark."

Aich says, "There is a likelihood that the Government will announce an increase in other allowances such as HRA, as these allowances are also linked to a government employee’s cost of living. There has not been an official notification on the same yet."