8th Pay Commission: How gross salary of central government employees may double in 7 years at high annual increment rate, DA merger with basic pay - The Economic Times

Central government employee and pensioner bodies in their recommendations submitted to the 8th Pay Commission have emphasised on increasing the annual increment rate and merging dearness allowance (DA) with basic pay at a certain stage. A key reason behind such a move is that a high annual increment and DA merger can quicken the growth of basic salary of an employee, bringing relief to all specially those at the lower rung of pay matrix. At the current growth rate of 3% annual increment, the basic salary growth of Rs 18,000 for a Level 1 employee is up to Rs 23,486 (30.47%) in 10 years. Other than that, they get DA, house rent allowance (HRA) and transport allowance (TPTA). But DA and HRA depend on the basic pay, TPTA is fixed and increases only when DA reaches 50%.Also Read: 8th Pay Commission: How 6% annual increment may add Rs 20 lakh to Level 8 employees' basic pay in 10 yearsA higher annual increment and merger with DA can increase their gross salary substantially. An expert illustration shows how gross salary will double in just seven years at a 7% annual increment rate and the merger of DA with basic pay when dearness allowance reaches at 25%. What are key employee bodies’ recommendations about annual increment hike and dearness allowance? National Council of the Joint Consultative Machinery (NC-JCM), the main central government employee body, proposes a 6% annual increment in its memorandum to the 8th Pay Commission. It wants all allowances to be increased by three times and then be linked with the DA hike.Also Read: Will Income Tax Department extend July 31 ITR filing deadline? Here’s what chartered accountants believeSome organisations like the National Federation of Postal Employees (NFPE) and the All India New Pension Scheme Employees Federation (AINPSEF) want DA to be merged with basic pay when it reaches at 25%. Organisations such as Indian Railways' Supervisors' Association (IRTSA) and Pragatisheel Shikshak Nyaya Manch (PSNM), on the other hand, want DA to be merged with basic pay at 50%. Organisation Proposed Annual Increment Proposed DA National Council of the Joint Consultative Machinery (NC-JCM) 6% All allowances to be increased by three times and to be linked with DA increase National Federation of Postal Employees (NFPE) 6% At 25%, DA should be merged with basic pay All India New Pension Scheme Employees Federation (AINPSEF) 7% At 25%, DA should be merged with basic pay Indian Railways' Supervisors' Association (IRTSA) 5% At 50%, DA should be merged with basic pay Pragatisheel Shikshak Nyaya Manch (PSNM) 7% At 50%, DA should be merged with basic pay All India Defence Employees' Federation (AIDEF) 6% All allowances to be increased by three times and to be linked with DA increase How higher annual increment, DA merger may double gross salary of employees in 7 years? Manjeet Singh Patel, national president of the All India NPS Employees Federation (AINPSEF), in a projection shows how at a fitment factor of 2.1, annual increment of 7% and a merged DA at 25% with basic pay, the gross pay of an employee can double in seven years. Projections of salary of Level 1 employee in 8th Pay Commission Basic pay ₹ 18,000 Revised basic pay at 2.1 fitment factor (8th CPC) ₹ 37,800 Date Basic Pay (₹) DA Rate DA Amount (₹) Gross Salary (₹) Gross Salary increase 01-Jan-26 37800 0% 0 37800 01-Jan-27 40446 4% 1617.84 42063.84 11% 01-Jan-28 43277.22 8% 3462.1776 46739.3976 24% 01-Jan-29 46306.625 12% 5556.795 51863.4204 37% 01-Jan-30 49548.089 16% 7927.6943 57475.7834 52% 01-Jan-31 53016.455 20% 10603.291 63619.7465 68% 01-Jan-32 56727.607 24% 13614.626 70342.2331 86% 01-Jan-33 60698.54 28% 16995.591 77694.131 106% Source: Manjeet Singh PatelNote: These are projections. The salary of a Level 1 employee in the 8th Pay Commission may differ. Assumptions:Basic Salary in 7th Pay Commission: ₹18,000Basic Salary on 1 January 2026 (At 2.1 fitment factor): ₹37,800Annual increase in Basic Salary: 7% (compounded every year)Dearness Allowance (DA): 0% on January 1, 2026From 1 July 2026 onwards, increases by 2% every six monthsOn 1 January 2033, 25% DA is merged with basic pay For a person drawing revised salary in the 8th Pay Commission with effect from January 1, 2026, Patel says, at a 4% annual rate growth rate, DA will reach at 25% in January 2033, and at that time, the employee’s basic salary will double.