Annual increment

The annual increment is the yearly rise in a central government employee’s pay, granted by moving the employee one cell down the same level of the pay matrix, which works out at 3% of basic pay, on either 1 January or 1 July. Rule 9 of the Central Civil Services (Revised Pay) Rules, 2016 grants it and Rule 10 fixes the date. It is the routine, event-free progression of pay: unlike a promotion or an MACP upgradation, nothing has to happen except the passage of a year, and it does not change the employee’s level, only the stage within it.

Two rules and one report do all the work. Rule 9, headed “Increments in Pay Matrix”, says the increment is whatever the next vertical cell of the level says it is. Rule 10 says there are two increment dates and each employee gets one of them. The 3% figure that everybody quotes is in neither rule; it is in the 7th Central Pay Commission report at paragraph 5.1.38, and it is the rule that generated the printed table rather than an entitlement written into law.

The increment is the most frequent pay change an employee experiences, and it is also the one most often disturbed by something else: a spell of extraordinary leave, a suspension, a promotion falling on an awkward date, a minor penalty, or a retirement that lands one day short. This article sets out the rate and the rounding convention, the two dates and how an employee’s date is decided, the six-month qualifying-service condition, what leave and suspension do to it under FR 24 and FR 26, the interaction with promotion and MACP fixation, withholding as a penalty, the notional increment for employees retiring on 30 June or 31 December, the ceiling of a level, and what the increment carries with it in allowances and pension contributions. Load-bearing points are cited to the governing rule, Office Memorandum or judgment.

What the annual increment is

The annual increment is granted by Rule 9 of the CCS (Revised Pay) Rules, 2016, notified by gazette notification G.S.R. 721(E) dated 25 July 2016 and in force from 1 January 2016. The rule is headed “Increments in Pay Matrix” and provides that the increment is as specified in the vertical cells of the applicable level, illustrating it with an employee drawing Rs. 32,300 in Level 4 moving to Rs. 33,300. The entitlement is therefore a cell, not a percentage.

That design decision is what makes the increment automatic. The employee does not change level, does not change post, and needs no order beyond the routine one recording the movement. Pay grows between promotions because the column of a level runs to 40 stages in Levels 1 to 10.

An employee who is never promoted still sees pay rise every year through the increment, until the bottom cell of the level is reached.

The 3% rate and the rounding convention

The rate is 3%, and it is not written in the Rules. The CCS (Revised Pay) Rules, 2016 never state the increment as a percentage anywhere. The rate is stated in the 7th Central Pay Commission report at paragraph 5.1.38: “The rate of annual increment is being retained at 3 percent.” Paragraph 5.1.21 describes the vertical dimension of the matrix as the steps of annual financial progression of three percent within each level. Rule 9 then hands the employee the cell that 3% produced.

Cells round to the nearest Rs. 100, not up to the next Rs. 100. A column is generated mechanically from its entry cell: Level 6 starts at Rs. 35,400, and Rs. 35,400 multiplied by 1.03 gives Rs. 36,462, printed as Rs. 36,500. The next products are Rs. 37,595 printed as Rs. 37,600, then Rs. 38,700, Rs. 39,900 and Rs. 41,100.

One consequence is that an individual step is rarely exactly 3%. Rounding down shortens a step and rounding up lengthens one: Level 6 moves from Rs. 50,500 to Rs. 52,000, a rise of 2.97%. The cell is the entitlement and the percentage is the rule that generated it, so an employee arguing for an extra rupee on a 3% calculation has no case; the printed Schedule governs.

The rounding convention itself is prescribed nowhere. It is not in the CCS (Revised Pay) Rules, 2016 and not in Chapter 5.1 of the 7th CPC report. It is observable in the printed Schedule and inferred from it.

The increment in rupees rises with the level, because 3% of a larger basic pay is a larger sum.

Each row is the entry cell of the level and the cell immediately below it in the pay matrix at Schedule I of the Rules.

The two increment dates

Rule 10 of the CCS (Revised Pay) Rules, 2016 provides two increment dates, 1 January and 1 July, and gives each employee exactly one of them. Before the 7th CPC there was a single date: every employee’s increment fell on 1 July under the 6th Central Pay Commission scheme, notified in Rule 10 of the CCS (Revised Pay) Rules, 2008. The uniform date is itself a 6th CPC innovation, replacing an increment that fell on the anniversary of appointment or of the last increment, which scattered increments across the calendar. The second date was introduced so that the administrative work of processing increments is spread across the year, and so that a new recruit does not wait almost a full year for a first increment merely because of the month of joining.

Whichever of the two dates applies, the increment is identical: one cell down the level, 3%. The date decides only when in the year the rise takes effect.

Rule 10 grants one increment a year and no more. An employee on the January cycle does not also draw an increment in July.

How an employee’s increment date is decided

The increment date follows from the date of appointment, promotion or grant of financial upgradation, through the window rule in Rule 10(2), whose two windows are inclusive of their boundary dates. An employee whose event falls between 2 January and 1 July draws the increment on the following 1 January. An employee whose event falls between 2 July and 1 January draws it on the following 1 July. In each case the employee will have completed six months at the stage by the time the increment date arrives.

An employee joining on 10 March therefore draws the first increment on the following 1 January, having completed almost ten months by then. An employee joining on 20 September draws it on the following 1 July.

Once set, the date stays with the employee until an event such as a promotion resets it, so an employee is on either the January cycle or the July cycle and knows the date years in advance. The date of next increment is simply the next occurrence of that date.

The six-month qualifying-service condition

The six-month condition is not in the CCS (Revised Pay) Rules, 2016, where the words “six months” do not appear. It was introduced by Department of Expenditure Office Memorandum No. 4-21/2017-IC/E.III(A) dated 31 July 2018, recited in paragraph 2 of Office Memorandum No. 4-21/2017-IC/E.IIIA dated 28 November 2019, and it governs the first increment in a level to which an employee has been promoted, where six months of qualifying service must be strictly fulfilled. Rule 10(2) needs no such test on first appointment, because its windows already leave between six and twelve months at the stage. The condition is nonetheless the point at which most disputes about an increment date arise, because “qualifying service” is narrower than “elapsed time”.

Two things shorten qualifying service without shortening the calendar: extraordinary leave taken otherwise than on a medical certificate, and any period treated as dies non. Where either intervenes and the employee falls short of six months at the stage on 1 January or 1 July, the increment is postponed to the next increment date, six months later.

Nothing else needs to be done to draw the increment. There is no application, and no sanction is required beyond the office order recording the movement.

Leave, suspension and dies non

FR 24 and FR 26 of the Fundamental Rules, not the CCS (Revised Pay) Rules, decide whether a period counts towards an increment. FR 24 provides that an increment shall ordinarily be drawn as a matter of course unless it is withheld, and that an increment may be withheld if conduct has not been good or work has not been satisfactory, in which case the withholding authority must state the period of withholding and whether the postponement will have the effect of postponing future increments. FR 26(a) provides that all duty in a post on a time scale counts for increments in that time scale.

Leave is settled by FR 26(b)(ii): all leave counts for the increment except extraordinary leave taken otherwise than on a medical certificate. So earned leave, half pay leave, commuted leave, maternity leave and child care leave leave the increment date untouched. Extraordinary leave without a medical certificate does not count, and the proviso to FR 26(a) adds the non-counting period to the normal date of increment, which in practice pushes the increment to the following 1 January or 1 July.

Suspension is different again, and harsher. A government servant under suspension does not earn increments during the period, because suspension interrupts duty and FR 26(a) counts only duty in the time scale. The period is later regulated on reinstatement: where the suspension is held to have been wholly unjustified and the period is treated as duty under FR 54, the increments for that period are restored notionally and the increment date is undisturbed. Where the period is not converted into duty, the increment is lost for it.

Probation stops nothing. A probationer draws the increment on the ordinary increment date, subject to the same six-month condition, because FR 24 and FR 26(a) attach to duty in the time scale rather than to confirmation. Three things stop a probationer’s increment: an order withholding it, the operation of an efficiency bar, or a rule tying the increment to passing a departmental examination.

The date of next increment and the FR 22 option

The date of next increment, almost always shortened to DNI, is the next 1 January or 1 July on which the employee’s pay will rise by one increment. It matters most at promotion, where it is not merely a date but a choice worth money.

Under FR 22(I)(a)(1) a promotee may opt, in writing within one month of the date of promotion, to have pay fixed either from the date of promotion or from the date of next increment in the lower post. Opting for the date of next increment defers the fixation but lands two increments on the same day: the annual increment in the lower level under Rule 10, and then the promotional increment under Rule 13, applied to the higher figure. That sequence often places the employee on a higher cell of the promoted level than immediate fixation would.

The option is exercised once and is final in the ordinary case, but paragraph 2 of DoPT OM No. 16/8/2000-Estt.(Pay-I) dated 25 February 2003 permits a revised option within one month where an unforeseen development alters the position. The arithmetic of both routes, with worked examples, is in the pay fixation on promotion article; the general treatment is in pay fixation.

Promotion and MACP

A promotion carries its own increment, granted by Rule 13 of the CCS (Revised Pay) Rules, 2016, which is a separate event from the annual increment under Rule 9. Rule 13 works by giving one increment in the level currently held and then placing the employee at the equal or next higher cell of the promoted level. The same rule applies to a financial upgradation under the Modified Assured Career Progression scheme.

In the year of a promotion an employee therefore receives both increments: the annual one on the increment date and the promotional one on the date fixed under FR 22(I)(a)(1). They are not double-counted, because the FR 22 option decides the order in which they apply.

The first increment in the promoted level accrues on the following 1 January or 1 July only if six months of qualifying service in that level is strictly completed by that date, under paragraph 5 of Department of Expenditure OM No. F.No. 4-21/2017-IC/E.III(A) dated 31 July 2018. A promotion taking effect on a date other than an increment date, where the employee has opted under FR 22(I)(a)(1) for fixation from the date of next increment, is dealt with by Issue No. 2 of DoE OM No. 4-21/2017-IC/E.IIIA dated 28 November 2019.

A promotion to a post in the same pay level carries no increment at all. That result comes from FR 22(III), which provides that such an appointment is not deemed to involve the assumption of duties and responsibilities of greater importance, so FR 22(I)(a)(1) never engages and Rule 13 is never reached.

MACP differs from promotion in what it moves. The Supreme Court drew the distinction in Union of India v. M.V. Mohanan Nair, (2020) 5 SCC 421, decided on 5 March 2020: MACP moves the employee up the pay hierarchy to the next level in the matrix, not up the promotional hierarchy of posts. The increment mechanics under Rule 13 are the same either way.

Withholding of an increment as a penalty

Withholding of increments is a minor penalty under Rule 11(iv) of the CCS (Classification, Control and Appeal) Rules, 1965. It works by holding back the increment that would otherwise fall due on the next 1 January or 1 July after the penalty date, rather than by cutting the pay already drawn, which is what separates it from a reduction to a lower stage in the time scale.

The form of the penalty decides its cost. Withholding without cumulative effect is temporary: at the end of the specified period the increment is restored on a notional basis, without arrears and without disturbing the date of next increment, so the loss is confined to the penalty period itself. Withholding with cumulative effect is permanent: the increment is never restored, all later pay is worked out from the lower stage, the effect compounds through every future increment, and because the pay at retirement is lower the pension falls too. The regulation of pay under this penalty in the pay matrix is set out in DoPT OM No. 11012/15/2016-Estt.A-III dated 18 June 2019.

Three situations require the full major-penalty inquiry under Rule 14 even though the penalty is a minor one: where the increment is withheld for a period exceeding three years, where it is withheld with cumulative effect for any period, and where the withholding is likely to affect the pension adversely. A with-cumulative-effect withholding therefore always needs a formal inquiry and cannot be imposed on the shorter minor-penalty procedure. The mechanics are set out in full in withholding of increment.

Absent such an order, the increment is due on the increment date without any application. A poor grading in the annual performance appraisal report is not such an order and does not withhold anything: Rule 9 and Rule 10 of the CCS (Revised Pay) Rules, 2016 make no reference to a grading or a benchmark, and paragraph 5.1.46 of the Seventh Central Pay Commission report, which proposed withholding increments from employees who miss the promotion or MACP benchmark inside their first 20 years of service, was not carried into the consolidated MACP guidelines of 22 October 2019.

Retirement on 30 June or 31 December

An employee retiring on superannuation on 30 June or 31 December earns no increment on the plain words of Rule 10, having retired the day before it fell due, and a large cohort retires on exactly those two dates because superannuation falls on the last day of the month in which the employee turns 60. That employee has served the whole preceding year. Missing the final increment lowers the last pay on which the pension is computed, permanently.

The courts corrected the result. The Madras High Court granted a notional increment for pension in P. Ayyamperumal v. Union of India, W.P. No. 15732 of 2017, by order dated 15 September 2017, implemented for the petitioner alone. The Supreme Court then held in Civil Appeal No. 2471 of 2023, decided on 11 April 2023 in the Karnataka Power Transmission Corporation matter, that an employee retiring one day before the increment, having rendered the preceding year with good conduct and efficiency, is entitled to that one increment for pension. By order dated 20 February 2025 the Court gave final directions for those who had not litigated.

For central government employees the benefit is implemented by DoPT OM No. 19/116/2024-Pers.Pol.(Pay) dated 14 October 2024 and the DoPT OM dated 20 May 2025. Two limits define it. The increment is reckoned only for calculating the pension admissible and not for other pensionary benefits, so the retirement gratuity, the commutation and the leave encashment stay on the pay actually drawn. For those who did not litigate, the higher pension is payable on and after 1 May 2023, with no enhanced pension for any period before 30 April 2023.

The full treatment, including eligibility from 1 January 2006 and how the increment feeds the pension calculation, is in notional increment on superannuation.

The top of a level

The annual increment stops at the last cell of a level, because there is no further cell to move to. Pay progression can then come only from a promotion or an MACP upgradation to a higher level. There is no stagnation increment under the 7th CPC to grant a further rise once a column is exhausted.

The columns were built long enough that most employees never reach the bottom. Paragraph 5.1.39 of the 7th CPC report records that the spans of the lower levels were kept at 40 years to ensure that no stagnation takes place, so Levels 1 to 10 each carry 40 stages, which is longer than most careers.

Levels 17 and 18 are the exception at the other end. Both are single fixed cells, Rs. 2,25,000 and Rs. 2,50,000, with no vertical column and therefore no annual increment at all. An officer at either level, up to and including the Cabinet Secretary, draws the same basic pay throughout, and only dearness allowance revisions change the figure.

What the increment carries with it

A 3% rise in basic pay is worth more than 3% of basic pay, because the main allowances and both retirement contributions are computed as percentages of it. Dearness allowance is 60% of basic pay from 1 January 2026, under Department of Expenditure OM No. 1/1(i)/2026-E.II(B) dated 22 April 2026, so it rises by the same 3%. House rent allowance is 30%, 20% or 10% of basic pay by city class and rises in the same proportion.

Take a Level 6 employee in an X-class city moving from Rs. 35,400 to Rs. 36,500. Basic pay rises by Rs. 1,100, dearness allowance by Rs. 660, and house rent allowance by Rs. 330, so the gross rise is Rs. 2,090 a month against a headline increment of Rs. 1,100.

The contributions rise too. An employee under the National Pension System contributes 10% of basic pay plus dearness allowance and the government contributes 14%, both computed on the higher figure, so the increment enlarges the pension corpus as well as the salary. An Old Pension Scheme employee subscribing to the General Provident Fund at the minimum 6% of emoluments sees that subscription rise on the same base.

Transport allowance does not move with the increment. It is a fixed monthly figure by pay level and city, revised only when the level changes or the dearness allowance rate on it is revised, so an increment within the same level leaves it untouched.

The compounding matters more than any single year. Because each increment is computed on the pay that the previous increment produced, a career of 30 increments at 3% multiplies basic pay by roughly 2.4 before any promotion, pay commission revision or MACP upgradation is counted.

Bunching: the one-time extra increment of 2016

Bunching of pay granted an extra increment, over and above the annual one, to employees whose pre-revised stages collapsed onto a single cell at the 2016 fixation. It is a one-time event of the transition from the 6th CPC running pay band to the pay matrix, not a recurring entitlement, but it still explains why two employees at the same level today sit on cells that their service records do not obviously account for.

The rule is one additional increment for every two consecutive stages that bunch, with two pays treated as consecutive stages only if they are at least 3% apart. The Department of Expenditure first gave effect to bunching by OM No. 1-6/2016-IC dated 7 September 2016, withheld unimplemented fixations by the OM dated 13 June 2017, and issued the operative clarification on 3 August 2017. Office Memorandum No. 1-6/2016-IC/E-IIIA dated 7 February 2019 added the worked illustrations at Level 13 and confirmed that the benefit is not applied a second time to a stage that lands on the cell the bunching created.

Four different increments

The word “increment” carries four distinct meanings in central government pay, and orders routinely use it without saying which is meant.

Only the first is automatic and recurring. The other three each require an event, an order, or both.

Bearing on the 8th Central Pay Commission

The increment scheme described here belongs to the 7th CPC and stays in force until fresh rules are notified. The 8th Central Pay Commission, constituted in November 2025, will on implementation issue revised-pay rules carrying their own increment provision, and whether it retains the 3% rate, the two increment dates and the six-month condition is a matter for the Commission’s report. The staff side has periodically sought a higher rate.

Nothing has changed yet. As on 5 August 2026 the Commission has not submitted its report, no revised-pay rules have been notified, and the annual increment remains 3%, one cell down the pay matrix, on 1 January or 1 July, under Rule 9 and Rule 10 of the CCS (Revised Pay) Rules, 2016. Any 8th CPC increment figure in circulation is a projection and not an order.

Related Articles

• Date of next increment
• Withholding of increment
• Notional increment on superannuation
• Option for pay fixation on promotion
• Stepping up of pay
• Pay fixation on promotion
• Pay fixation
• Bunching of pay
• Stagnation increment
• Efficiency bar
• Technical resignation
• Pay protection
• Pay matrix
• Fitment factor
• Minimum pay
• Modified Assured Career Progression
• Grade pay
• Pay band
• CCS (Revised Pay) Rules, 2016
• CCS (CCA) Rules
• Minor penalty
• Suspension
• Extraordinary leave
• Probation
• Dies non
• Dearness allowance
• House rent allowance
• Transport allowance
• General Provident Fund
• National Pension System
• Pension calculation
• Gratuity for central government employees
• Commutation of pension
• Leave encashment
• 7th Central Pay Commission
• 8th Central Pay Commission
• Central Pay Commission
• Central government employees in India
• Take-home salary of central government employees
• Department of Expenditure
• Department of Personnel and Training
• 7th CPC salary calculator

External references

• Department of Expenditure, Ministry of Finance
• 7th Central Pay Commission report (doe.gov.in)
• Department of Personnel and Training
• Fundamental (Amendment) Rules, 2018, substituting FR 22(I)(a)(1)
• The Gazette of India (egazette.gov.in)
• Department of Pension and Pensioners’ Welfare

References

1. Central Civil Services (Revised Pay) Rules, 2016, gazette notification G.S.R. 721(E), Ministry of Finance, Department of Expenditure, dated 25 July 2016, in force from 1 January 2016: Rule 9 (increments in the pay matrix, granted by movement to the next vertical cell of the level), Rule 10 (the two increment dates of 1 January and 1 July and the both-inclusive window rule in Rule 10(2); the Rules contain no six-month condition), Rule 13 (fixation of pay on promotion or MACP upgradation), and Schedule I (the pay matrix).
2. Report of the Seventh Central Pay Commission (submitted 19 November 2015), paragraph 5.1.38 (“The rate of annual increment is being retained at 3 percent.”), paragraph 5.1.21 (the vertical dimension as annual financial progression of three percent), and paragraph 5.1.39 (spans of the lower levels kept at 40 years so that no stagnation takes place).
3. Fundamental Rules: FR 24 (increment drawn as a matter of course unless withheld, and the requirement that the withholding order state the period and whether future increments are postponed), FR 26(a) (all duty in a post on a time scale counts for increments, with the proviso adding non-counting periods to the normal date of increment), FR 26(b)(ii) (all leave counts except extraordinary leave taken otherwise than on a medical certificate), FR 22(I)(a)(1) and FR 22(III) as substituted by DoPT Notification No. 13/1/2017-Estt.(Pay-I), G.S.R. 370, dated 19 November 2018, and FR 54 (regulation of the suspension period on reinstatement).
4. Central Civil Services (Classification, Control and Appeal) Rules, 1965, Rule 11(iv) (withholding of increments as a minor penalty) and Rule 14 (the inquiry required where the withholding exceeds three years, carries cumulative effect, or affects the pension adversely).
5. Department of Personnel and Training Office Memorandum No. 11012/15/2016-Estt.A-III dated 18 June 2019, on the regulation of pay in the pay matrix where the penalty of withholding increments is imposed.
6. Department of Personnel and Training Office Memorandum No. 16/8/2000-Estt.(Pay-I) dated 25 February 2003, paragraph 2, permitting a revised option under FR 22(I)(a)(1) within one month on an unforeseen development.
7. Ministry of Finance, Department of Expenditure Office Memorandum No. F.No. 4-21/2017-IC/E.III(A) dated 31 July 2018, paragraph 5, and Office Memorandum No. 4-21/2017-IC/E.IIIA dated 28 November 2019, Issue No. 2, on the accrual of the first increment in the promoted level and on promotion falling on a date other than an increment date.
8. Supreme Court of India, Civil Appeal No. 2471 of 2023, decided on 11 April 2023 (the Karnataka Power Transmission Corporation matter), with final directions by order dated 20 February 2025; and Madras High Court, P. Ayyamperumal v. Union of India, W.P. No. 15732 of 2017, order dated 15 September 2017.
9. Department of Personnel and Training Office Memorandum No. 19/116/2024-Pers.Pol.(Pay) dated 14 October 2024, and Office Memorandum dated 20 May 2025, granting the notional increment for the pension of employees retiring on 30 June or 31 December.
10. Ministry of Finance, Department of Expenditure Office Memorandum No. 1-6/2016-IC dated 7 September 2016, the Office Memorandum dated 13 June 2017, and the Office Memorandum dated 3 August 2017, on bunching of pay at the 2016 fixation.
11. Supreme Court of India, Union of India v. M.V. Mohanan Nair, (2020) 5 SCC 421, decided on 5 March 2020, on the distinction between MACP and promotion.
12. Ministry of Finance, Department of Expenditure Office Memorandum No. 1/1(i)/2026-E.II(B) dated 22 April 2026, fixing dearness allowance at 60% of basic pay with effect from 1 January 2026.