In a pivotal update as of May 2025, the Government of India has officially merged the Dearness Allowance (DA) with the basic salary for Central Government employees and pensioners. This policy change affects over 50 lakh serving employees and around 65 lakh retirees. While the merger has brought some welcome improvements to salary structures, many are disappointed by the government’s decision not to revise the fitment factor, which remains at 2.57.
What Does the DA Merger Mean?
The DA merger essentially involves folding the current Dearness Allowance into the basic pay. Since DA is designed to offset inflation, incorporating it into the base salary raises the overall compensation structure. This adjustment influences future pay hikes, pensions, gratuity amounts, and various allowances.
Why It Matters:
- Stabilized Pay Structure: Helps remove discrepancies caused by fluctuating DA percentages.
- Improved Post-Retirement Benefits: A higher basic pay directly increases pension and gratuity amounts.
- Lays Groundwork for Reforms: This merger signals the potential rollout of the 8th Pay Commission reforms.
The last time such a merger was implemented was before the 6th Pay Commission. Nearly two decades later, this move marks a long-overdue structural correction.
Fitment Factor: Still at 2.57
Despite widespread demands for an increase, the fitment factor remains unchanged at 2.57. This number is used to calculate revised salaries during pay matrix revisions. For example, if your basic pay is Rs. 18,000, it gets multiplied by 2.57 to arrive at the new pay level.
Current Scenario:
- Fitment Factor in 2025: 2.57 (unchanged)
- Employee Demands: Between 3.00 and 3.68
- Government Position: No change due to fiscal limitations and macroeconomic caution
What Are the Benefits Despite No Fitment Hike?
Even without a revision in the fitment factor, the DA merger offers numerous financial benefits:
- Higher House Rent Allowance (HRA) and other allowances, since these are calculated on the revised basic pay
- Boost in Retirement Corpus: Increases gratuity, pension, and NPS contributions
- Potential Income Tax Reclassification: Higher income might place some employees into a different tax bracket, especially under the new tax regime
Who is Covered Under This Decision?
The policy impacts a wide spectrum of government-affiliated roles:
| Category | Affected by DA Merger |
|---|---|
| Central Government Employees | Yes |
| Central Government Pensioners | Yes |
| Defence Personnel | Yes |
| Employees of Autonomous Bodies | Yes |
DA Merger Impact: With vs Without Fitment Factor Hike
| Criteria | With Fitment Factor Hike | Without Fitment Factor Hike |
| Revised Basic Pay | Higher | Moderate |
| Dearness Allowance | Reduced post-merger | Reduced post-merger |
| Net Monthly Salary | Significant Increase | Slight Increase |
| HRA & Other Allowances | Substantially Higher | Increased |
| Pension Calculation Base | Higher | Moderate |
| Income Tax Bracket | Likely to Change | Less Likely |
| Government Financial Load | High | Controlled |
Why No Fitment Hike? Government’s Explanation
The government has justified its stance with the following points:
- Budgetary Responsibility: Salaries and pensions already form a large chunk of government spending.
- Inflation Control: A sharp hike could lead to inflationary pressures.
- Future Pay Commission: With the 8th Pay Commission expected soon, a temporary freeze allows more flexibility for comprehensive reform.
What Should Employees and Pensioners Do Now?
To effectively navigate this transition:
- Review your updated pay slips to ensure DA has been correctly merged
- Recalculate allowances such as HRA and Travel Allowance
- Update tax planning according to your new gross income
- Pensioners should verify changes in their pension statements
- Keep track of developments regarding the 8th Pay Commission
Quick Snapshot: Summary of DA Merger Effects
| Criteria | Status After Merger |
| DA Included in Basic Pay | Yes |
| Fitment Factor Changed | No (Remains 2.57) |
| Minimum Basic Salary | Unchanged |
| HRA and Related Allowances | Likely Increased |
| Net Salary | Slightly Higher |
| Pension Calculation | Based on Revised Basic |
| 8th Pay Commission | Awaited |
Conclusion
While the merger of DA with basic pay is a meaningful update that corrects long-standing structural issues, the unchanged fitment factor tempers its overall impact. Government employees and pensioners should remain engaged, proactive, and well-informed as larger reforms are likely on the horizon with the anticipated 8th Pay Commission. This is a transitional period—one that offers moderate benefits today but potentially more significant changes tomorrow.
FAQs
What is the DA merger, and how does it affect me?
The DA merger combines the inflation-linked Dearness Allowance with your basic salary. This impacts allowances, retirement benefits, and future pay hikes.
Has the fitment factor been revised in 2025?
No, the fitment factor remains at 2.57. Despite demands for a higher multiplier, the government has not made any changes due to fiscal concerns.
Will my HRA and other allowances increase?
Yes, since these allowances are calculated as a percentage of your basic pay, the DA merger will result in higher payouts.
Does this apply to defence personnel and pensioners?
Yes, the DA merger applies to all central government employees, including defence personnel and pensioners.
What can I expect from the 8th Pay Commission?
Although there’s no official announcement yet, the 8th Pay Commission is expected to address fitment factor revisions and further streamline pay structures.
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