Expected dearness allowance

As on 18 August 2026 the next dearness allowance computes to 63%, and no order has been issued. The dearness allowance stands at 60% of basic pay with effect from 1 January 2026, notified by Department of Expenditure Office Memorandum No. 1/1(i)/2026-E.II(B) dated 22 April 2026, and the next revision takes effect from 1 July 2026. That July figure comes from the 12-month average of the All-India Consumer Price Index for Industrial Workers for July 2025 to June 2026, a window that closed on 31 July 2026 when the Labour Bureau published the June 2026 index at 151.9.

The average of those twelve months is 148.65 on the 2016 base, which is 428.11 on the 2001-equivalent scale and gives 63.76%, stated as 63. The arithmetic is settled. The entitlement is not: it arises only on the Cabinet decision and the Department of Expenditure order, which for a July revision ordinarily lands in September or October.

An expected dearness allowance is that computed figure, held apart from the notified rate until the Office Memorandum appears. The distinction matters in rupees. An employee at the Level 7 entry cell of Rs. 44,900 draws Rs. 26,940 a month at the notified 60% and would draw Rs. 28,287 at 63%, but the higher figure is payable on no date until an order names one.

This page sets out what the projection is and what it is not, the formula and the two index bases that produce most published errors, the month-by-month window with each value traced to its Labour Bureau release, the treatment of the fraction, who the eventual revision reaches and who draws a different rate, the arrears it will generate and how they are taxed, its effect on other allowances and on retirement contributions, its bearing on the 8th Central Pay Commission, and the January 2027 window now half open.

Projection versus notified entitlement

A projected dearness allowance is a computation, and a notified dearness allowance is an entitlement; only the second can be drawn. The dearness allowance is revised twice a year, with effect from 1 January and 1 July, and each revision is fixed by a formula rather than by discretion. Because that formula runs on a 12-month average of a published index, the answer is largely knowable before it is announced.

Two things separate the computation from the money. The first is index completeness: for most of a revision cycle one or more months of the window are unpublished, and a sharp move in a missing month shifts the average. That reason has expired for July 2026, because the window closed on 31 July 2026.

The second reason has not expired. The effective date and the arithmetic are automatic, but the order is an administrative act. The Union Cabinet approves the revision and the Department of Expenditure notifies it, normally some weeks or months after the effective date, and until then nothing is payable. The revision to 60% effective 1 January 2026 was notified on 22 April 2026, so for those three and a half months the 60% figure was in exactly the position 63% occupies now.

Current position and the July 2026 projection

The dearness allowance is 60% of basic pay with effect from 1 January 2026, notified by Department of Expenditure Office Memorandum No. 1/1(i)/2026-E.II(B) dated 22 April 2026, a rise of two points from 58%. That is the rate in force and it is final.

The revision with effect from 1 July 2026 uses the AICPI-IW average for July 2025 to June 2026. That window closed on 31 July 2026, when the Labour Bureau published the June 2026 index at 151.9 in press release F. No. 5/1/2021-CPI. The twelve values average 148.65 on the 2016 base, which the linking factor of 2.88 converts to 428.11 on the 2001-equivalent scale. The formula, (428.11 minus 261.42) divided by 261.42 multiplied by 100, gives 63.76%. Stated as a whole number, the July 2026 dearness allowance is 63%, a rise of three points.

Formula, linking factor and base index

The projection uses the same formula that fixes the notified rate, and it has three moving parts: the monthly index, the linking factor of 2.88, and the base index of 261.42. Each monthly value on the 2016 base is multiplied by 2.88 to restore the 2001 base on which the dearness allowance is anchored, the twelve months of the window are averaged, and:

Dearness allowance percentage = [ ( (12-month average on the 2016 base x 2.88) minus 261.42 ) / 261.42 ] x 100, stated as a whole number.

The linking factor is the Labour Bureau’s own ratio, published on 22 October 2020 when the 2016 series was released, and it makes a 2016-base index of 100 correspond to about 288 on the old base. The constant 261.42 is the 2015 average on the 2001 series, the point from which the 7th Central Pay Commission measures price rise.

Order of operations does not matter here. Converting each month and then averaging gives 428.11, and averaging first and then converting gives 428.11, because multiplication by a constant distributes across an average. What does matter is doing the conversion exactly once, which is the point at which most published projections go wrong.

The July 2026 revision averages July 2025 to June 2026; the January 2027 revision will average January to December 2026. Only the closing month of a window is ever in doubt, and a single month can move a 12-month average by no more than a twelfth of its own movement, which is why a projection made with eleven months in hand rarely changes when the twelfth lands.

The 12-month window, month by month

Every month of the July 2025 to June 2026 window is published, and each value traces to a dated Labour Bureau press release in series F. No. 5/1/2021-CPI.

The sum of the twelve values is 1,783.8 and the average is 148.65. The run rises by 5.4 points across the year, from 146.5 to 151.9. February 2026 is the only month to fall, by 0.1 point, and November and December 2025 are the only pair to hold level at 148.2. Neither interruption changed the direction of the average.

Each value appears about a month after the month it measures. The July 2025 index was released on 29 August 2025, the October 2025 index on 28 November 2025, the December 2025 index on 30 January 2026 and the closing June 2026 index on 31 July 2026, a cadence of the last working day of the following month that has held through the window.

The values from July 2026 onwards belong to the window for the 1 January 2027 revision and have no bearing on the July 2026 rate.

Treatment of the fraction

The computed 63.76% becomes a notified 63% because the fraction is dropped, but no order says so. Each Department of Expenditure Office Memorandum states the rate as a decided figure and gives no derivation, so the treatment of the fraction has to be read off the sequence of orders rather than a published instruction.

Across every revision notified since 1 January 2016 the notified rate equals the computed percentage with the fraction dropped. The January 2026 window, covering January to December 2025, averaged 145.54 on the 2016 base and computed to 60.34%, and the rate was fixed at 60. The July 2026 window computes to 63.76% and gives 63. On that pattern a revision could in principle hold at the same whole number as the one before, if the average rose without crossing an integer boundary, though every half-yearly revision since 1 July 2021 has lifted the rate by at least two points.

One rounding provision does appear in the orders, and it is about money rather than percentages. Paragraph 4 directs that fractions of 50 paise and above be rounded to the next higher rupee and fractions below 50 paise be ignored, which applies to the rupee figure after the percentage has been applied to basic pay.

What can still move the number

Nothing can now move the July 2026 percentage. The window closed with the June 2026 index of 151.9 on 31 July 2026, the 12-month average is 428.11 on the 2001-equivalent scale, and 63% is what the formula returns. The Labour Bureau does occasionally revise a published index value, but such a revision has not disturbed a completed dearness allowance window since the 2016 series began.

What remains open is timing, not quantum. The Cabinet decision and the Department of Expenditure order set when the money is paid; they do not set the effective date, which is 1 July 2026 by the standing twice-yearly cycle, and they do not set the rate, which the index has already fixed.

What cannot move it is speculation. The dearness allowance is not settled by negotiation or by announcement; it is the mechanical output of a formula on a published index. A figure such as 70%, which no published index value supports, is not a possibility for the July 2026 revision however often it is repeated.

Why published projections differ

Most conflicting expected DA figures come from one error: mixing the 2016 and 2001 index bases. A 12-month average near 148 sits on the 2016 base and must be multiplied by 2.88 before the formula is applied. A figure near 428 is already on the 2001-equivalent scale and must not be multiplied again. Applying the formula to an unconverted average produces a nonsensical negative result; converting twice produces a percentage more than 100 points too high.

A second error is averaging the wrong twelve months. The July revision uses July to June, not the twelve most recently published months, and not the calendar year. In August 2026 the last twelve published months run August 2025 to July 2026, which is not the window any revision uses.

A third is quoting a mid-window average as though the window were closed. Projections circulated in the first half of 2026 rested on six to eleven published months, and several put the July 2026 average near 149.5, which is above the true closed-window figure of 148.65 because it dropped the lower months of late 2025 out of the average. The published monthly series is the check on all three errors: twelve dated values, one linking factor, one base index.

Notified, computed and speculative rates

Three kinds of figure circulate under the name “DA rate”, and only one is payable.

The middle column is what this page tracks. The right-hand column is the class of figure that circulates ahead of every revision and does not survive contact with the twelve published index values.

Dearness relief for pensioners

Pensioners draw dearness relief at the same percentage and from the same dates as serving employees, so the computed 63% for 1 July 2026 is equally a computed 63% dearness relief. The rate is currently 60% of basic pension with effect from 1 January 2026, and dearness relief is ordered separately by the Department of Pension and Pensioners’ Welfare rather than by the Department of Expenditure.

Two orders, one figure. The Department of Expenditure order covers serving employees and the Department of Pension and Pensioners’ Welfare order covers pensioners and family pensioners, and they carry the same percentage and the same effective date. A pensioner watching for the July 2026 revision is therefore waiting on a different order from the one an employee is waiting on, usually issued within days of it.

Dearness relief is computed on basic pension before commutation is deducted, so a pensioner who has commuted a portion still draws relief on the full original basic pension. At a computed 63%, a basic pension of Rs. 30,000 would carry Rs. 18,900 as dearness relief against Rs. 18,000 at the notified 60%.

Coverage: autonomous bodies, public sector enterprises and states

A revision to 63% would reach central government employees and pensioners, and no one else automatically. An Office Memorandum revising dearness allowance is addressed to the ministries and departments of the Government of India, which fixes its reach.

Employees of central autonomous bodies and statutory bodies are not central government employees, so a revision does not extend to them of its own force. Such a body adopts it under Department of Expenditure Office Memorandum F. No. 1/2/2016-E-III(A) dated 26 July 2017, whose paragraph 3 permits revision only of those allowances that already follow the central government pattern exactly. The adoption is a separate decision and often carries a later date.

Central public sector enterprises draw Industrial Dearness Allowance instead, a different rate on a different cycle, fixed quarterly by the Department of Public Enterprises rather than half-yearly by the Department of Expenditure. State government employees draw whatever percentage their own state finance department notifies. Most states follow the central figure, but by their own orders and frequently from a later date, and some notify a different percentage.

Arrears when the order issues

A July revision notified in September or October produces three or four months of arrears, paid as a lump sum with the first revised monthly payment. Arrears are the difference between the new rate and the old rate applied to the basic pay actually drawn in each month from 1 July 2026 to the month the order is implemented, with paise rounded under paragraph 4 of the Office Memorandum.

The January 2026 revision shows the shape of it. The order of 22 April 2026 took effect from 1 January 2026, so three months of arrears, for January, February and March 2026, were released with the April 2026 salary. At Level 7 entry cell, basic pay Rs. 44,900, the 2% rise was Rs. 898 a month and the arrears were Rs. 2,694.

At a 3% rise from 60% to 63%, the same employee gains Rs. 1,347 a month. An order implemented with the October 2026 salary would carry four months of arrears, July to October, of Rs. 5,388, after which the higher rate is drawn every month. The DA arrears calculator works the same difference across the intervening months for any level and stage.

Arrears are taxed in the year of receipt, not the year they relate to, because Section 15 of the Income-tax Act, 1961 brings salary to charge on a due or receipt basis. Where the lump sum pushes total income into a higher slab than it would otherwise have reached, relief under Section 89 is computed under Rule 21A of the Income-tax Rules, 1962 and claimed in Form 10E, which must be filed online and before the return. The relief operates against tax computed rather than as a deduction, so it survives under the new regime in Section 115BAC.

Effect on other allowances and contributions

A move from 60% to 63% crosses no allowance threshold, so no house rent allowance slab changes. House rent allowance rose to 30%, 20% and 10% of basic pay for X, Y and Z class cities on 1 January 2024, the date dearness allowance crossed 50%, under the pre-authorised escalation in paragraph 3 of Office Memorandum No. 2/5/2017-E.II(B) dated 7 July 2017. That order provides for two steps only, at 25% and at 50%, and both have been taken. The same is true of the allowances that step up by 25% at the 50% milestone, including children education allowance and hostel subsidy.

Retirement contributions do move, because they are computed on basic pay plus dearness allowance. Under the National Pension System the employee contributes 10% and the government 14% of basic pay plus dearness allowance, so both legs rise from the month the revised rate is drawn. General Provident Fund subscription is fixed by the subscriber as a percentage of emoluments within the statutory limits, so a higher dearness allowance widens the permissible range rather than raising the subscription by itself.

Transport allowance carries dearness allowance on top of its fixed figure, so it rises with the rate as well. House rent allowance does not, being computed on basic pay alone; the dearness allowance rate decides which slab applies, not the base the slab is applied to.

Bearing on the 8th Central Pay Commission

The accumulated dearness allowance sets the base a pay commission works from, which is why the current cycle is watched more closely than usual. The 8th Central Pay Commission was constituted in November 2025 and must report by 3 May 2027. When a pay commission’s structure takes effect, the accumulated dearness allowance is merged into the revised basic pay and the counter resets to zero, as it did on 1 January 2016.

Nothing is lost on merger. The accumulated percentage is absorbed into the new basic pay rather than dropped, and it then feeds the fitment arithmetic that the 8th CPC will settle. The 60% now in force, and the 63% computed for July 2026, are part of what a revised structure would absorb.

There is no separate mid-cycle merger. Unlike the 5th CPC practice, which converted part of the dearness allowance into dearness pay in 2004, the 7th CPC framework carries no automatic merger at any threshold, and the Minister of State for Finance told the Lok Sabha in December 2025 that no proposal to merge dearness allowance with basic pay is under consideration. Until a revised structure is notified, the dearness allowance is paid separately and in full.

The January 2027 window

The revision after July 2026 takes effect from 1 January 2027 and averages January to December 2026. Six of those twelve months were published as on 18 August 2026, January to June 2026, and they average 149.8 on the 2016 base against the 148.65 of the closed July window.

Half a window is not a projection. A six-month average sits above the twelve-month figure here only because the lower months of late 2025 are absent from it, which is the arithmetic that makes mid-window figures run high. The January 2027 rate firms up through the second half of 2026 as each month is published, and it completes with the December 2026 index due at the end of January 2027.

The direction is upward on the published run, which rose 5.4 points across the July 2025 to June 2026 window. Naming a January 2027 percentage now would require assuming the six unpublished months, and no order or index value supports such a figure.

Tracking the running average

The computation is reproducible from public data, and the Labour Bureau publishes everything it needs. The all-India AICPI-IW appears every month, ordinarily on the last working day of the following month, at labourbureau.gov.in, each release carrying its F. No. 5/1/2021-CPI number and stating the point value and the movement from the previous month.

The method is four steps. Record each new month’s index as it appears; keep the twelve months of the current window and no others; average those twelve values and multiply by 2.88; then subtract 261.42, divide by 261.42, multiply by 100, and drop the fraction.

Two habits keep the tracking honest. The first is to watch the whole 12-month window rather than the latest single month, because the allowance moves on the average and one sharp month only nudges it. The second is to keep the notified figure apart from the computed one: the July 2026 window is closed and 63% is arithmetically settled, but it remains unpayable until the Department of Expenditure issues the order. The AICPI-IW article carries the compilation method and the base-conversion detail in one place, and the expected DA calculator applies the formula to a set of index values without the arithmetic being done by hand.

Effect on the monthly pay slip

The percentage is applied to basic pay, the cell value from the employee’s level and stage in the pay matrix. At the notified 60% an employee on a basic of Rs. 50,000 draws Rs. 30,000 as dearness allowance; at the computed 63% the figure would be Rs. 31,500, a difference of Rs. 1,500 a month.

The rise reaches the pay slip in two parts. The months between the effective date and the order accumulate as arrears and are paid in a single lump sum, and the higher rate then runs every month thereafter. For the employee above, an order implemented in October 2026 would carry Rs. 6,000 of arrears for July to October alongside the first revised monthly payment.

Dearness allowance is fully taxable as salary in both tax regimes, and a rise carries no exemption with it. The 7th CPC salary calculator applies the current notified 60% rate to a chosen level and city and shows the build-up of gross and take-home pay; the DA arrears calculator works out the arrears once a revision is notified.

Related Articles

• Dearness allowance: the 60% rate in force, its revision history, coverage and tax treatment.
• AICPI-IW: the index, the 2.88 linking factor, and the formula behind every revision.
• Dearness relief: the pensioner counterpart, ordered by the Department of Pension and Pensioners’ Welfare.
• Labour Bureau: the office that compiles and publishes the monthly index.
• Expected DA calculator: the formula applied to a set of index values.
• DA arrears calculator: the arrears produced by a revision.
• 7th CPC salary calculator: the notified rate applied to a pay level and city.
• Pay matrix: the basic pay the percentage is applied to.
• 7th Central Pay Commission: the report that set the formula and the base index of 261.42.
• 8th Central Pay Commission: the pending review and the merger of accumulated dearness allowance.
• 8th Pay Commission latest news and status: the constitution date and the reporting deadline.
• 7th vs 8th Pay Commission: the fitment arithmetic the accumulated rate feeds.
• Dearness pay: the 2004 merger under the 5th CPC and why it was not carried forward.
• House rent allowance: the slabs that stepped up when dearness allowance crossed 50%.
• City classification for HRA: the X, Y and Z classification behind those slabs.
• Children education allowance: one of the allowances keyed to the 50% milestone.
• Hostel subsidy: the companion allowance on the same escalation.
• Transport allowance: the allowance that itself carries dearness allowance.
• National Pension System: contributions computed on basic pay plus dearness allowance.
• General Provident Fund: subscription on emoluments including dearness allowance.
• Gratuity for central government employees: the emoluments that include dearness allowance.
• Industrial Dearness Allowance: the separate quarterly rate for public sector enterprises.
• Section 89 relief: relief on arrears taxed in the year of receipt.
• Take-home salary: where the revised rate lands after deductions.
• Suspension: dearness allowance on subsistence allowance under FR 53.
• Earned leave: leave salary and the dearness allowance paid on it.
• Half pay leave: dearness allowance on half-rate leave salary.
• Department of Expenditure: the department that issues the revision order.
• Department of Pension and Pensioners’ Welfare: the department that issues the dearness relief order.
• Central government employees in India: the wider pay framework.

External references

• Labour Bureau: Consumer Price Index for Industrial Workers
• Labour Bureau: CPI-IW press notes
• Department of Expenditure, Ministry of Finance
• Department of Pension and Pensioners’ Welfare
• Income Tax Department
• Department of Public Enterprises

References

1. Labour Bureau, Ministry of Labour and Employment, press release F. No. 5/1/2021-CPI dated 31 July 2026, All-India CPI-IW for June 2026 at 151.9 points (base 2016 = 100).
2. Labour Bureau, monthly CPI-IW press releases in series F. No. 5/1/2021-CPI for July 2025 to May 2026, supplying the remaining eleven values of the revision window.
3. Ministry of Finance, Department of Expenditure, Office Memorandum No. 1/1(i)/2026-E.II(B), dated 22 April 2026, revising dearness allowance to 60% with effect from 1 January 2026.
4. Ministry of Finance, Department of Expenditure, Office Memorandum No. 2/5/2017-E.II(B), dated 7 July 2017, on house rent allowance and its dearness-allowance-linked escalation at the 25% and 50% thresholds.
5. Ministry of Finance, Department of Expenditure, Office Memorandum F. No. 1/2/2016-E-III(A), dated 26 July 2017, on extension of the 7th CPC allowance decisions to quasi-government organisations, autonomous organisations and statutory bodies.
6. 7th Central Pay Commission report (2015), on the dearness allowance formula and the base index of 261.42.
7. Labour Bureau, release of the 2016-base CPI-IW series and the linking factor of 2.88, 22 October 2020.
8. Income-tax Act, 1961, Sections 15, 89 and 115BAC, read with Rules 21A and 21AA of the Income-tax Rules, 1962.