In a landmark decision in May 2025, the Government of India has officially merged the Dearness Allowance (DA) with the basic salary of Central Government employees and pensioners. This move affects over 50 lakh active employees and approximately 65 lakh pensioners across the country. However, the unchanged fitment factor of 2.57 has left many disappointed, despite the overall structural benefits.
What is the DA Merger and Why Is It Important?
The DA merger means that the existing DA component, which was at 62% as of July 2025, is now absorbed into the basic pay. This recalibration improves the foundational pay scale, influencing future salary hikes, pensions, and allowances such as House Rent Allowance (HRA) and Travel Allowance (TA).
Why the Merger Matters
- Stronger Pay Base: With DA forming part of the basic pay, salaries become more consistent and less volatile.
- Enhanced Post-Retirement Benefits: Pension and gratuity are now calculated on a higher basic pay.
- Signals Reform Readiness: This sets the stage for the potential rollout of the 8th Pay Commission.
This is the first DA merger since the one prior to the 6th Pay Commission, marking a significant shift after nearly 20 years.
Fitment Factor Remains Unchanged at 2.57
Despite longstanding demands from employee unions to raise the fitment factor to between 3.00 and 3.68, the government has maintained it at 2.57.
| Parameter | Value / Status |
|---|---|
| Current Fitment Factor | 2.57 (unchanged) |
| Employee Demand | 3.00 to 3.68 |
| Government Justification | Fiscal constraints |
| Expected Revision | With 8th Pay Commission |
What Employees Gain Even Without a Fitment Hike
Even with the fitment factor held steady, the merger has significant financial implications.
- Increased HRA and TA: As these are linked to basic pay, they will now be calculated on a higher base.
- Larger Retirement Corpus: Higher pension, NPS contributions, and gratuity.
- Tax Implications: Some employees may fall under higher tax brackets.
Who Is Covered Under This Merger
| Category | Covered Under Merger |
|---|---|
| Central Government Employees | Yes |
| Pensioners and Family Pensioners | Yes |
| Armed Forces Personnel | Yes |
| Employees of Central Autonomous Bodies | Yes |
Impact Comparison: With vs Without Fitment Hike
| Criteria | With Hike | Without Hike |
|---|---|---|
| Revised Basic Pay | Higher | Moderate |
| DA (post-merger) | Reduced | Reduced |
| Monthly Salary | Significant Rise | Slight Rise |
| Allowances | Substantially More | Increased |
| Pension Base | Higher | Moderate |
| Income Tax Bracket | Likely to Increase | May Not Change |
| Govt Budget Impact | High | Moderate |
Why the Government Did Not Revise Fitment Factor
The government has cited several reasons for maintaining the status quo:
- Budget Control: Salaries and pensions account for a large share of public spending.
- Macroeconomic Stability: Avoiding large-scale hikes helps contain inflation.
- Reform Planning: Focus is shifting to comprehensive changes under the upcoming 8th Pay Commission.
Next Steps for Employees and Pensioners
- Check updated salary slips and pension details
- Recalculate HRA, TA, and other allowances
- Plan taxes as per revised income
- Stay alert for 8th Pay Commission announcements
Quick Snapshot of the DA Merger Impact
| Key Factor | Status (Post Merger) |
|---|---|
| DA Added to Basic Pay | Yes |
| Fitment Factor Updated | No (Still 2.57) |
| HRA and TA | Increased |
| Pension and Gratuity | Higher |
| Take-Home Salary | Slightly Higher |
| Next Major Reform | 8th Pay Commission |
Conclusion
The DA merger into basic pay in 2025 marks a major shift in the pay structure for Central Government employees and pensioners. While the unchanged fitment factor limits the financial upside for now, the move offers stronger long-term benefits. As India prepares for larger pay commission reforms, this transition serves as a foundation for more comprehensive changes to come.
FAQs
What is the current fitment factor after the DA merger?
The fitment factor remains at 2.57, unchanged from previous levels.
Will this DA merger affect my HRA and other allowances?
Yes, allowances calculated on basic pay such as HRA and TA are expected to increase.
Is this DA merger a part of the 8th Pay Commission?
No, this is part of the 7th Pay Commission framework. The 8th Pay Commission is still awaited.
Will pensioners see an increase in their monthly pension?
Yes, since pension is calculated on basic pay, the merger results in a higher pension amount.
Why didn’t the government increase the fitment factor?
Due to budgetary constraints and efforts to maintain economic stability, the fitment factor was not revised.