8th Pay Commission: DA calculation rule set for major overhaul after 10 years

Changes are coming to how the Dearness Allowance for central government employees is calculated. With the base year shifting from 2016 to 2026 under the 8th Pay Commission, the current DA formula will reset.

8th Pay Commission Latest Update

Central government employees eagerly await the 8th Pay Commission announcement, anticipating a significant salary boost. While a pay raise is exciting, there's growing confusion about potential changes to how the Dearness Allowance (DA) is calculated. Reports suggest the government is considering a major shift in the DA formula by changing a rule that's been in effect for the last decade.

Dearness Allowance Update

Currently, the DA for central employees is calculated based on the Consumer Price Index for Industrial Workers (CPI-IW), using 2016 as the base year. This method was adopted when the 7th Pay Commission was implemented. Now, with the upcoming 8th Pay Commission, reports indicate the government is preparing to change this base year from 2016 to 2026. This adjustment means the current DA formula will completely reset, starting from zero, once the new pay commission takes effect.

Why Change the Base Year?

The reason for this potential change ties into how inflation trends and consumer spending patterns have evolved over the past decade. What people spent money on in 2016 is very different from their spending habits in 2025. Updating the base year allows for a more accurate reflection of current inflation and economic conditions. This change ensures salary revisions truly align with the current cost of living and benefit employees in the long run.

Will DA Actually Become Zero?

Technically, when the government updates the base year, the existing DA resets to zero. However, this doesn't mean employees will lose money. Instead, the current DA accumulated up to the implementation date will be merged into the new basic pay structure under the 8th Pay Commission. This creates a 'revised basic pay.' The big advantage is that future DA increases, whether 2% or 3%, will apply to this higher basic pay, resulting in a larger absolute increase each time the DA is revised.

When Will the 8th Pay Commission Be Implemented?

Media sources suggest the central government is expected to set up the 8th Pay Commission soon. This commission typically takes 15 to 18 months to study, recommend, and finalize the new pay structure. While the final announcement is pending, it's widely anticipated that the 8th Pay Commission will be implemented from January 1, 2026. Upon release, employees will also receive arrears from that date.