New Delhi: The Union Cabinet on Wednesday approved a 3 per cent increase in Dearness Allowance (DA) and Dearness Relief (DR) for over 1.17 crore union government employees and pensioners.
The move will raise DA and DR rates from the existing 60 per cent to 63 per cent of basic pay and pension, respectively.
Announcing the Cabinet decision, Information and Broadcasting Minister Ashwini Vaishnaw described it as a "Diwali gift".
An additional installment of DA to union government employees and DR to pensioners will be paid with effect from 1 July 2026.
The hike amounts to "an increase of 3 per cent over the existing rates of 60 per cent of the basic pay/pension, to compensate against price rise", an official release said.
The combined impact on the exchequer due to the increase in DA and DR would be Rs 10,016.10 crore per year.
The decision will benefit about 48.54 lakh central government employees and 68.71 lakh pensioners.
The increase is in accordance with the accepted formula, based on recommendations of the seventh Central Pay Commission, the release said.
The increase in these allowances is linked to an established formula and is intended to help protect the purchasing power of government employees and pensioners against price increases.
Dearness Allowance is paid to serving government employees to help offset the impact of inflation on their cost of living. Dearness Relief serves a similar purpose for pensioners, helping them manage the effect of rising prices on their pension income.
(With inputs from PTI & ANI)