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Government Services

DA Merger With Basic Pay: What the Rules Say

DA is not merged with basic pay just because it crosses 50%. The government says no merger proposal is under consideration.

AI

Written by Ananya Iyer

Published 30 September 2026·7 min read

On this page8 sections
Credsir Government Services guide cover with a landmark icon

No rule merges dearness allowance (DA) with basic pay when it crosses 50%. Merger happens only when the government decides it, usually through a pay commission award. On 1 December 2025 the government told the Lok Sabha that no proposal to merge DA with basic pay is under consideration. DA stands at 60% of basic pay from 1 January 2026.

Key facts

Item Detail
Current DA 60% of basic pay from 1 January 2026
Government position “No proposal regarding merger of the existing Dearness Allowance with the Basic Pay is under consideration” (Lok Sabha, 1 December 2025)
Only standalone merger 50% DA converted into Dearness Pay from 1 April 2004, after a 5th CPC recommendation
6th CPC view Did not recommend merger “at any stage”
7th CPC method Absorbed DA into the new basic through the 2.57 fitment factor
What 50% DA does trigger now Higher HRA rates, a 25% rise in some allowances and a higher gratuity ceiling
8th CPC Report due within 18 months of 3 November 2025; no merger decision announced

What DA merger means

DA is a percentage of basic pay paid to offset inflation. The Department of Expenditure treats it as a distinct element of pay, not as pay itself. Merger would move some or all of that DA into basic pay.

The change matters because many payments are worked out on basic pay alone. HRA is a percentage of basic pay, and the annual increment is 3% of it. When DA was converted into Dearness Pay in 2004, the new element counted as pay for most purposes, including retirement benefits.

Merger would also reset the DA counter. DA would then be paid as a smaller percentage of a larger basic.

The 50% rule: where it comes from

The idea goes back to the 5th Central Pay Commission (CPC). It recommended that DA equal to 50% of basic pay should be converted into Dearness Pay each time the price index rose 50% over its base.

The government acted on this once. Under a Finance Ministry OM of 1 March 2004, DA equal to 50% of basic pay became Dearness Pay from 1 April 2004. According to the 6th CPC report, Dearness Pay counted as pay for all purposes except:

  • travelling allowance and daily allowance;
  • Leave Travel Concession;
  • entitlement to government housing.

Pensioners got a matching change. Dearness Relief equal to 50% of pension was merged and shown as Dearness Pension, according to a Department of Pension OM of 26 October 2005.

The base index for DA was not changed, so DA kept being calculated as the old percentage minus 50.

The 7th CPC kept a different 50% rule, one that has nothing to do with merger. Allowances that are partly linked to DA rise by 25% each time DA rises by 50%.

How past pay commissions handled DA

6th CPC: no merger at any stage

The 6th CPC criticised the 2004 conversion. It said a merger should have come with a new, higher base index, which would have produced a lower DA rate. Its new structure paid increments as a percentage of pay and linked allowances to prices. For those reasons it said: “The Commission is, therefore, not recommending merger of dearness allowance with basic pay at any stage.” It also kept DA revisions twice a year, from 1 January and 1 July.

7th CPC: merger through the fitment factor

The 7th CPC treated merger as part of every pay revision. Its report says the merger of basic pay with DA “is inevitably carried out when Pay Commissions submit their recommendations”.

It built this into the 2.57 fitment factor. Of that figure, 2.25 absorbed DA, assumed at 125% on 1 January 2016. The real increase was 14.29%. A Department of Expenditure order later confirmed that revised pay included the 125% DA. DA on the new pay then began again at 2% from 1 July 2016.

The Commission also recommended keeping the existing DA formula based on the Consumer Price Index for Industrial Workers. Our fitment factor guide explains the 2.57 calculation.

What merger would do to salary and allowances

No merger has been proposed, so the example below is only a way to see which parts of pay would move. It assumes 50 of the 60 DA points were merged for a Level 1 employee on ₹18,000 and that HRA stayed at 30% of basic pay in an X city.

Item Today If 50% DA were merged (hypothetical)
Basic pay ₹18,000 ₹27,000
HRA at 30% of basic ₹5,400 ₹8,100
Next 3% increment ₹540 ₹810

In practice, the rates attached to basic pay might not stay the same. When the 7th CPC raised basic pay, it cut HRA from 30%, 20% and 10% to 24%, 16% and 8% for X, Y and Z cities. The government set the rates to rise back as DA crossed 25% and then 50%.

DA crossing 50% already brings three changes without any merger:

  • HRA rates return to 30%, 20% and 10%.
  • Allowances that are partly linked to DA rise by 25%.
  • The ceiling on retirement and death gratuity rose from ₹20 lakh to ₹25 lakh from 1 January 2024, when DA reached 50%.

To see how a change in basic pay moves your in-hand pay, use the take-home salary calculator. If you rent, our HRA exemption guide explains how much of your HRA is tax-free.

Current status

#ItemDetails
11 December 2025In reply to Lok Sabha unstarred question 212, Minister of State for Finance Pankaj Chaudhary said no proposal to merge DA with basic pay is under consideration.
218 April 2026The Cabinet raised DA and DR from 58% to 60% from 1 January 2026 under the 7th CPC formula.
316 September 2026No DA rate from 1 July 2026 has been announced, and no merger order has been issued.
48th CPCIts report is due within 18 months of 3 November 2025. Any merger of DA into a new pay structure would come through that award, if the government accepts it.

Employee unions have asked for 50% of DA to be merged before the 8th CPC reports, as Upstox has reported. Until an order appears on the Department of Expenditure website, treat any merger news as a demand, not a decision. For how DA is revised in the meantime, see our DA hike guide, and for the Commission’s timeline, the 8th Pay Commission status page.

Frequently asked questions

Will DA be merged with basic pay when it crosses 50%?

Not automatically. No current rule requires it, and the government told Parliament in December 2025 that no merger proposal is under consideration.

Has DA ever been merged with basic pay?

Yes, once as a standalone step. DA equal to 50% of basic pay became Dearness Pay from 1 April 2004, following a 5th CPC recommendation.

Will the 8th Pay Commission merge DA?

The Commission has not reported yet. At the last revision, the 7th CPC absorbed accumulated DA into the new basic pay through its fitment factor.

Will DA become zero after the 8th Pay Commission?

Nothing has been announced. After the 7th CPC, the 125% DA was built into revised pay and the first DA on the new pay was 2% from 1 July 2016.

What changes when DA reaches 50%?

HRA goes up to 30%, 20% and 10% of basic pay, allowances partly linked to DA rise by 25%, and the gratuity ceiling rose to ₹25 lakh from January 2024.

Does DA merger apply to pensioners?

In 2004, 50% Dearness Relief was merged with pension as Dearness Pension. No merger for pensioners has been proposed now.

Sources

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