8th Pay Commission: Will DA Merge with Basic Pay? What It Means for Govt Employees
Central government employees and unions are urging the Finance Ministry to honor the historical precedent. “When DA crosses 50%, it should be merged. We expect the government to act in good faith,” said a senior union representative.
8th Pay Commission: Will DA Merge with Basic Pay? What It Means for Govt Employees
New Delhi, Oct 22, 2025 — As the 7th Pay Commission nears its end on December 31, 2025, speculation is mounting over a major reform that could redefine the salary structure of central government employees and pensioners: the merger of Dearness Allowance (DA) with Basic Pay under the upcoming 8th Pay Commission.
What Is DA and Why It Matters
Dearness Allowance is a cost-of-living adjustment paid to government employees and pensioners to offset inflation. It is revised twice a year based on the Consumer Price Index for Industrial Workers (CPI-IW). As of July 2025, the DA stands at 58%, and is expected to rise to 60.61% in January 2026.
Historically, when DA crosses the 50% threshold, it has been merged with basic pay - a precedent set during the 5th Pay Commission (1996) and repeated in the 6th Pay Commission (2006). However, the 7th Pay Commission (2016) did not follow this tradition, leaving employees eager for a reset.
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Read Also : 8th Pay Commission: Will DA Merge with Basic Pay? What It Means for Govt EmployeesWhat the 8th Pay Commission Proposes
The 8th Pay Commission is scheduled to take effect from January 1, 2026, and discussions are underway to merge DA with basic pay, resetting DA to zero and recalculating salaries using a new fitment factor, which may range from 1.83 to 2.86.
This move could Simplify salary structures, Make pay more transparent and inflation-responsive, Increase pension benefits, which are calculated on basic pay.
Benefits of DA Merger
Higher Take-Home Pay: Merging DA into basic pay boosts the base for other allowances like HRA and TA.
Better Pension Calculations: Pensioners benefit as their payouts are based on basic pay.
Tax Efficiency: A streamlined salary structure may reduce tax complications.
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Increased Tax Liability: A higher basic pay could push some employees into higher tax brackets.
Budgetary Pressure: The government may face fiscal strain due to increased salary and pension outflows.
Delay in Implementation: No formal committee has yet been announced, raising concerns about timely execution.
What Employees Are Saying
Central government employees and unions are urging the Finance Ministry to honor the historical precedent. “When DA crosses 50%, it should be merged. We expect the government to act in good faith,” said a senior union representative.