Central and state government employees and pensioners are about to find some respite. Their Dearness Allowance may spike from 53% to 57% in July 2025, based on the expectation from an increase in 4%. This benefit will directly accrue to thousands of employees and pensioners, whose monthly incomes will mitigate inflation.
Basis And Calculation Of DA Hike
An adjustment to the DA is based on the index of Consumer Price Increase released by the Central Statistics Office. With inflation rising for the last few months, chances of a DA hike have also been strengthened. Traditionally, the DA is announced in March and September, but this time it may be done in July, 2025.
How Much Will Salary And Pension Increase?
In case of a 4% increase in DA, an employee getting a basic salary of Rs 50,000 will be able to take home an additional Rs 2,000 in a month. The increase would similarly affect the pensioners. However, the DA increase benefits accrue only to employees working under the 7th Pay Commission. State government employees, though, are also likely to receive a similar increase in DA, which will, however, be announced by the individual state governments.
What will be the tax deduction thereon?
The DA increase will thereby augment the employees’ income but will also be liable to tax. Since DA is part of the salary, it is liable for income tax. If the government announces any tax exemption, the employees may receive extra relief.
What Will Be The Tax Impact?
It is expected that an official announcement regarding the DA hike will be made by the government in July 2025. The implementation of the DA hike will occur with effect from January 1, 2025, which will consequently give employees an amount of arrears. Employee unions are also raising demands to increase DA over and above 57%, but a decision from the government is yet to be made.
Conclusion: Good News For Employees
The possibility of a DA increase in 2025 will provide relief for employees and pensioners against the burden of inflation. However, one has to wait for the official announcement. If you are a government employee or you are on pension, keep checking for the latest news with your pay department.
Also Read: Home Loan Rules 2025: RBI’s New Guidelines Every Borrower Must Know
