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The 8th Central Pay Commission led by Justice Ranjana Desai will review salaries, allowances, and pensions for Central government employees and pensioners.
The current DA stands at 58 per cent of basic salary applicable from July 1, 2025.
8th Pay Commission: The Indian government has released the Terms of Reference (ToR) for the 8th Central Pay Commission (CPC), a three-member committee led by Justice Ranjana Desai. The commission is expected to submit the recommendations within 18 months to revise salaries, bonuses, gratuity, and performance-linked incentives.
The ToR outline the scope, objectives, and key tasks of the Pay Commission, such as reviewing the salary structure, allowances, pensions, pay parity, and service conditions of Central government employees and pensioners. It also includes studying the impact on public finances and ensuring fairness and fiscal sustainability in pay revisions. The ToR acts as the foundation document of any pay commission.
There’s a likelihood possibility that the commission will submit the report not before mid-2027. The Cabinet then will go through recommendations and decide on approval. However, new recommendations will be effective retrospectively from January 1, 2026. This means central government employees and pensioners will receive their increased salary and benefits only after the approval, but the arrears will be counted from January 1, 2026.
Will DA, HRA, TA And Other Allowance Stop After January 01, 2026?
There are concerns among central employees and pensioners on Dearness Allowance (DA), House Rent Allowance (HRA), and other allowances. The current DA stands at 58 per cent of basic salary applicable from July 1, 2025.
Employees and pensioners have the common doubts on DA and other emolument hikes post the formation of the 8th pay commission, which will make recommendations by mid-2027 and effective retrospectively from January 1, 2026.
Ramachandran Krishnamoorthy, Director- Payroll Services, Nexdigm told ET Wealth that DA hikes and other allowances will be calculated on the 7th pay commission, given the 8th pay commission’s recommendations being not implemented.
Krishnamoorthy explains that DA is revised twice a year, which means there would be three revisions over an 18-month period at the 6-month, 12-month and 18-month points. Starting with the current DA of 58%, and assuming a rough increase of 3% each time for illustration, the DA would move to 61% after six months, then to 64% after twelve months, and finally to about 67% at the end of eighteen months. This is only an example, since the actual hike depends on CPI.
According to Manjeet Singh Patel, National President of the All India NPS Employees Federation as quoted by ET Wealth, DA will continue to rise every six months. So, if the 8th Pay Commission takes around 18 months to implement, employees can expect three DA hikes before the new pay structure begins. Once the new pay commission is in place, this DA will be merged with the basic salary to form the new basic pay.
Manjeet explains that these DA hikes, along with annual increments, play a direct role in shaping the fitment factor — the multiplier used to calculate the new basic pay. For example, with the current DA at 58% and an expected cumulative increase of about 7% over 18 months, plus two annual increments of 3.5% each (7% total), an employee’s basic pay would effectively grow by around 20%. This alone could lift the fitment factor from 1.58 to 1.78.
The family unit number is another component. The 7th CPC used a family size of 3, but the 8th CPC ToR suggests 3.6. Assuming it settles at 3.5, this could add another 20% to basic pay, pushing the fitment factor to about 1.98. On top of that, the government usually adds an inflation growth factor, expected to be at least 15%, which takes the fitment factor to roughly 2.13.
Patel says a fitment factor of around 2.13 is realistic with three DA hikes in the next 18 months. He also notes that if DA had been merged with basic pay when it touched 50% in early 2024, salaries would already be about 8–10% higher. Still, the upcoming DA hikes should help bring the fitment factor to a reasonable level.
Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst…Read More
Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst… Read More
November 20, 2025, 07:59 IST
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