Will DA Be Added to Basic Pay Under the 8th Pay Commission? Finance Ministry Issues Clear Statement

Central government employees have long speculated whether Dearness Allowance will be merged with basic pay under the anticipated 8th Pay Commission. A fresh clarification from the Finance Ministry now settles the debate for the moment.

The Finance Ministry told Lok Sabha on 1 December 2025 that DA will not be merged with basic pay under the 8th Pay Commission, Mint reported, ending months of speculation.

Union Minister Ashwini Vaishnaw earlier confirmed that the Centre approved the formation of the 8th Pay Commission, which is expected to review salaries, pensions and allowances for nearly one crore employees and pensioners. However, the government made it clear last week that merging DA or DR with basic pay is not under consideration.

What Exactly Did the Finance Ministry Say About the DA Merger?

Pankaj Chaudhary, Minister of State in the Ministry of Finance, stated in a written reply that the government is not examining any proposal to merge existing DA with basic pay. His statement was in response to a query raised by MP Anand Bhadauria, who argued that employees and pensioners have been heavily impacted by inflation.

Chaudhary clarified:

“No proposal regarding merger of the existing dearness allowance with the basic is under consideration with the government at present.”
 

The last DA increase, a 3% hike approved on 1 October 2025, impacted 49.19 lakh employees and 68.72 lakh pensioners, reflecting the government’s biannual inflation-adjustment mechanism.

8th Pay Commission Structure, Timeline and Key Responsibilities

The Union Cabinet approved the Terms of Reference (ToR) for the 8th Pay Commission in October 2025. The Commission will review salary structures, allowances, pensions and service conditions.
 

The Commission will analyse multiple macroeconomic factors including:

• India’s fiscal capacity
• Pension burden and unfunded liabilities
• Impact on state governments (which often adopt central pay commission recommendations)
• Salary comparison with PSU and private-sector benchmarks

Its recommendations are expected to influence pay structure for the next decade.

An article by LoansJagat explains debt-management strategies, relevant for government employees planning finances ahead of 8th Pay Commission changes.

Why Employees Expected a DA Merger?

In earlier pay commissions, DA was merged selectively:

• Before the 6th Pay Commission, the government merged DA with basic pay when inflation crossed specific thresholds.
• The 7th Pay Commission, however, kept DA and DR separate, warning that merging them would sharply increase long-term pension liabilities.

Employee unions argued that merging DA with basic pay boosts retirement benefits, aligns pay with inflation, and counters loss of real income over time.

The Finance Ministry’s latest clarification indicates that fiscal prudence continues to guide decisions under the 8th Pay Commission.

What Stakeholders and Employee Groups Are Saying

Employee unions have expressed disappointment, stating that DA merger would have improved living standards amid rising retail inflation. 

However, ministry officials maintain that DA is already adjusted biannually and that merging DA with basic pay could create heavy, sustained pension liabilities for both the Centre and states.

Conclusion

The Finance Ministry has confirmed that DA will not be merged with basic pay under the 8th Pay Commission. 

While pay revisions are underway, the DA structure will remain unchanged until further government review.
 

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