The Centre on Thursday hiked Dearness Allowance (DA) to 50 per cent of basic pay from the existing rate of 46 per cent effective from January 1 this year, benefitting over 1 crore employees and pensioners ahead of general elections.

The Union Cabinet has approved to release an additional instalment of Dearness Allowance (DA) to Central Government employees and Dearness Relief (DR) to pensioners from January 1, 2024, representing an increase of 4 percentage points over the existing rate of 46 per cent of the basic pay/pension, to compensate against price rise, Union Minister Piyush Goyal said after the Cabinet meeting.

The combined impact on the exchequer on account of both Dearness Allowance and Dearness Relief would be Rs 12,869 crore per annum.

The impact would be Rs 15,014 crore during the year 2024-25 (January 2024 to February 2025).

With the increase in DA, transport allowance, canteen allowance, and deputation allowance among others have been increased by 25 per cent.

House Rent Allowance has been raised from 27 per cent, 19 per cent and 9 per cent of basic pay to 30 per cent, 20 per cent and 10 per cent, respectively.

Benefits under gratuity have been increased by 25 per cent with an increase ceiling of Rs 25 lakh from the existing Rs 20 lakh.

The burden on the exchequer due to an increase in various allowances would be Rs 9,400 crore annually.

The increase in DA and DR in accordance with the accepted formula, is based on the recommendations of the 7th Central Pay Commission.

The decision is likely to benefit 49.18 lakh central government employees besides 67.95 lakh pensioners as Dearness Relief (DR) has been increased at the same rate.