The Union Cabinet has approved a 3% increase in Dearness Allowance (DA) for central government employees ahead of Diwali. With this revision, DA has increased from 60% to 63% of basic pay, bringing relief to more than one crore employees and pensioners, according to the reported figures. The revised allowance will be effective from July 1, 2026. Employees are expected to receive their pending arrears along with their October salary, payable in November. The increase is expected to put an additional financial burden of ₹10,016 crore on the central government.


When Will Employees Receive the Increased DA?

The revised DA rate will apply retrospectively from July 1, 2026. This means eligible employees will receive arrears for the period between the effective date and the implementation of the revised rate. According to the report, the arrears will be added to the October salary and paid in November. Central government employees and pensioners had been waiting for the announcement after the increase was not announced in the previous two weekly Cabinet meetings. The latest decision comes as a major financial boost ahead of the festive season.


How Much Will Monthly Salary Increase?

The DA increase is calculated as a percentage of an employee’s basic pay, so the actual benefit depends on the salary level. For example, a central government employee at Level 5 with basic pay of ₹29,200 could receive an additional ₹876 per month through DA alone. Employees eligible for Transport Allowance may also receive a further increase because that allowance is linked to DA. In the transport allowance category for eligible cities, the additional amount could be around ₹108 per month, taking the combined monthly increase to approximately ₹984 in this example.


DA Revision Under the 7th Pay Commission

The increase follows the approved formula under the 7th Central Pay Commission. The Cabinet has also approved revisions for employees covered by the 6th and 5th Pay Commission pay structures. For the 6th Pay Commission, DA and Dearness Relief will rise from 262% to 269% of basic pay, an increase of 7 percentage points, effective July 1, 2026. Under the 5th Pay Commission, the rate will increase from 483% to 497%, a rise of 14 percentage points. The applicable rate depends on the employee’s pay structure.


₹10,000 Crore for Container Manufacturing

The Cabinet has also approved several development initiatives as part of a wider package worth ₹29,267 crore. These include the Container Manufacturing Promotion Scheme, with an allocation of ₹10,000 crore. The initiative aims to support domestic container manufacturing and strengthen production capacity. Another approved programme is the Khelo India Sports Goods Manufacturing Scheme, which has been allocated ₹1,856 crore. It is designed to support manufacturing and develop a stronger sports goods industry in India.


Sports Goods and Village Development Plans

The Khelo India Sports Goods Manufacturing Scheme will run for eight years, from the 2026-27 financial year to 2033-34. Its measures include manufacturing incentives, support for investment, assistance to existing industrial clusters, testing and certification, research, skill development and startup support. The Cabinet has also approved the Pradhan Mantri Viksit Gram Swaraj Yojana with an allocation of ₹7,395 crore. Together, these initiatives cover employee benefits, domestic manufacturing, sports goods production and village development.