8th Pay Commission: 3 key union proposals on DA for employees and pensioners
The 8th Pay Commission was constituted on 3 November 2025 as a three-member temporary panel headed by Justice Ranjana Prakash Desai. Under its Terms of Reference (ToR), it has 18 months from its constitution to submit its final report to the central government, after hearing the views and grievances of eligible unions, associations and other stakeholders.
Over the past few months, the commission has held meetings in several states and union territories, including Delhi, West Bengal, Ladakh and Uttar Pradesh. At these meetings, central government employee bodies have revived three long-pending demands on dearness allowance (DA) ahead of the final report: quarterly revisions instead of half-yearly hikes, merging DA with basic pay once it crosses 25%, and exempting DA from income tax.
These demands were recorded in the 6th Pay Commission’s 2008 report and have now resurfaced in submissions to the 8th Pay Commission. The Bharat Pensioners Samaj (BPS), for example, seeks quarterly revisions to DA and dearness relief (DR), while the Federation of National Postal Organisations (FNPO) wants DA merged with basic pay, and DR with basic pension, once the rate crosses 25%.
These are currently only proposals, not approved changes. Employees and pensioners will know whether they have been accepted only after the commission tables its final report and the central government decides which recommendations to implement. Here is a closer look at each proposal and how it could affect future pay and allowances.
At present, the DA is revised twice a year, with changes taking effect on 1 January and 1 July, based on the latest inflation data. On 28 October, for instance, the Union Cabinet approved a 3% hike in DA for central government employees and DR for pensioners, effective 1 July 2026, according to a Press Information Bureau release.
Employee bodies now want revisions every three months to help salaries keep pace with rising living costs. BPS has sought quarterly DA and DR revisions based on three-month average inflation data, with point-to-point compensation. This would give employees and pensioners inflation-linked relief more often.
Employee organisations have also proposed merging DA with basic pay once it exceeds 25%, rather than waiting for a higher threshold. In its detailed memorandum to the 8th Pay Commission, the FNPO has asked that DA and DR be merged with basic pay and basic pension, respectively, once the 25% mark is crossed. It has also requested point-to-point DA calculations without rounding. A merger could affect pay-linked benefits, but the actual impact would depend on the rules the government approves.
The FNPO has also proposed exempting DA from taxable income, arguing that it compensates employees for inflation rather than adding to their wealth. Its memorandum seeks tax exemptions for DA, house rent allowance and transport allowance, with the aim of helping serving and retired employees cope with inflation.
The 8th Pay Commission completes one year on 3 November. The panel recently held meetings in Bengaluru on 8 October and Mumbai on 23 October.
It will now review and analyse the representations before finalising its recommendations, after which the central government will decide whether to accept them. Until there are official updates, employees and pensioners should not factor these proposals into their long-term financial plans.
Shivam writes on personal finance, equity markets, and mutual funds. He has previously contributed to several leading publications, including Moneycontrol. He can be reached at shivam.shukla@htdigital.in
Get Latest real-time updates
Catch all the Instant Personal Loan, Business Loan, Business News, Money news, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
HomeMoneyPersonal Finance8th Pay Commission: 3 key union proposals on DA for employees and pensioners
✕
Wait for it…
Oops! Looks like you have exceeded the limit to bookmark the image. Remove some to bookmark this image.