DA Hike 2026 and Diwali Bonus: the 63% the Formula Gives, Arrears by Pay Level, the ₹6,908 Ad Hoc Bonus, Railway Bonus, and How Much Cash Your Employer Can Give

Two kinds of money decide how this Diwali feels for about 50 lakh central government employees and 68 lakh pensioners. The first is settled. The Cabinet approved the Railways' productivity bonus on 14 October, and the Finance Ministry's ad hoc bonus order for everyone else in Group C and non-gazetted Group B was signed the next day. The second is not. The dearness allowance (DA) instalment due from 1 July 2026 had not been announced by Saturday 24 October. This piece works that instalment out from the government's own price data, shows what it adds at each pay level and in arrears, reads the two bonus orders line by line, and ends with the question every employer, government or private, faces in the festive season: how much can be handed over, in cash or as a gift, before tax or a penalty applies.

Position on 24 October 2026. DA is 60% of basic pay from 1 January 2026, by the Cabinet decision of 18 April 2026. The 63% figure for the July 2026 instalment is this site's calculation, using the formula the Cabinet itself cites; it is not an announcement, and if the Cabinet decides a different figure, its decision governs and this page will be updated. Section numbers are from the Income-tax Act, 2025, with the 1961 number beside them; older references can be converted in the Act 2025 Translator.

DA hike latest news: where the next instalment stands

DA is revised twice a year, with effect from 1 January and 1 July, and each revision needs a Cabinet decision. The decision comes after the date it takes effect from, so each instalment arrives with arrears. The Press Information Bureau's records for the last four instalments show the rhythm:

The July instalment was approved on 16 October in 2024 and on 1 October in 2025, so a decision in the last week of October would not be unusual. Until it comes, salaries continue at 60%. Every one of those releases says the rise is "in accordance with the accepted formula" based on the 7th Central Pay Commission's recommendations. That formula is public, and so is the index it uses, which means the figure can be worked out before it is announced.

DA calculation formula: how 63% comes out of the price index

The formula takes the average of the All-India Consumer Price Index for Industrial Workers (CPI-IW) over the twelve months that end with June, for the July instalment, and compares it with the index level at which the 7th Pay Commission's pay scales were set. The Labour Bureau now publishes the index on a 2016=100 base, so it is first converted to the older 2001 base with the linking factor of 2.88.

DA % = [(12-month average of CPI-IW (2016=100) × 2.88) − 261.42] ÷ 261.42 × 100

The 261.42 is the average index, on the 2001 base, that the 7th Pay Commission's new pay absorbed. Any rise above it is the share of price increase that DA makes good. These are the twelve monthly figures from the Labour Bureau's own press releases:

1. The twelve figures add up to 1,783.8, an average of 148.65.
2. Multiplied by 2.88, that is 428.11 on the old base.
3. 428.11 less 261.42 is 166.69, and 166.69 ÷ 261.42 is 63.76%.
4. DA is sanctioned in whole percentage points, and past instalments have dropped the fraction, so 63.76% becomes 63%, a rise of 3 points over 60%.

There is little room for a different answer. The fraction would have to fall below 63.00% to give 62%, and the average would have to rise by more than 0.2 points to reach 64%. Neither can happen now, because all twelve months are already published. The only way the figure changes is if the government departs from its own formula, which it has not done in any of the instalments in the table above.

The newest index, for July 2026, released on 31 August, rose 1.3 points in a single month to 153.2. Year-on-year inflation on that index was 4.57%, against 2.66% a year earlier. July is the first month counted for the next instalment, the one from 1 January 2027, and it starts that count higher than any month before it.

DA hike table: how much more each pay level gets

DA is a percentage of basic pay, so a 3-point rise is simply 3% of your own basic pay, every month. The table uses the first cell of each level in the 7th Pay Commission pay matrix. If your basic pay is higher within the level, multiply your own figure by 3%.

Two adjustments change what actually reaches the bank account.

• Pension contribution. If you are under the National Pension System or the Unified Pension Scheme, your own contribution is 10% of basic pay plus DA. So 10% of the rise, and of the arrears, goes to your pension account. At Level 1 the cash in hand rises by ₹486 a month rather than ₹540; at Level 7 by ₹1,212 rather than ₹1,347. The government's contribution rises too, so nothing is lost; it is only paid later.
• Transport allowance. DA is also paid on transport allowance, so the actual rise is a little more than the table shows.

DA arrears: how much you will get, and when

The arrears are the 3 points for every month from July until the month the new rate first appears in salary. Central government salary for a month is paid on its last working day. If the order is issued in time for the October salary, the arrears cover July, August and September, three months. If it misses October, they cover July to October, four months.

The total is the same either way. Under the second route you simply receive one more month as arrears and one month less as regular pay. A rough DA arrears calculator for any basic pay: basic pay × 3% × number of months. A Level 6 employee drawing ₹41,100 would get ₹1,233 more a month and ₹3,699 of arrears for three months.

Dearness relief for pensioners

Pensioners and family pensioners get dearness relief (DR) at the same rate and from the same date as DA; the Cabinet decides both together. The 7th Pay Commission minimum pension is ₹9,000.

DR is taxed in the same way as the pension itself, as salary. Banks that pay pensions credit the arrears once the pension authorities send the revised rate.

Diwali bonus 2026 for central government employees: the ₹6,908 ad hoc bonus

Ministries whose staff have no productivity-linked bonus pay an ad hoc bonus, also called the non-PLB bonus. The Department of Expenditure's order for 2025-26 is dated 15 October 2026 (O.M. No. 7/24/2007/E III(A)). Its main terms:

Bonus calculation formula

The order divides a month's emoluments by 30.4, the average length of a month, and multiplies by the number of days of bonus:

Ad hoc bonus = ₹7,000 × 30 ÷ 30.4 = ₹6,907.89, rounded to ₹6,908

Because the lowest basic pay under the 7th Pay Commission is ₹18,000, everyone's emoluments are above the ₹7,000 cap, so every eligible employee with a full year's service gets the same ₹6,908, whatever the pay level. An employee who joined on 1 August 2025, with eight months of service in the year, would get ₹6,908 × 8 ÷ 12 = ₹4,605.

Railway bonus 2026: 78 days of productivity linked bonus

On 14 October 2026 the Cabinet approved a productivity linked bonus (PLB) of 78 days' wages for 2025-26 for railway employees. The figures in the release:

• ₹17,951 is the most any one employee receives for 78 days.
• 11,40,770 employees are covered, all non-gazetted: track maintainers, loco pilots, train managers (guards), station masters, supervisors, technicians, technician helpers, pointsmen, ministerial staff and other Group C staff.
• ₹2,009.61 crore is the total. Divided over 11,40,770 people that is about ₹17,616 each, close to the maximum, because almost everyone's wages are above the calculation ceiling.
• It is paid each year before the Durga Puja and Dussehra holidays, so for most railway staff it has already been credited.

The release ties the bonus to the year's performance: a record 1,670 million tonnes of freight loaded and about 7.41 billion passengers carried in 2025-26. Officers, being gazetted, are outside the scheme.

Diwali bonus in a private company: the minimum the law requires

Since the labour codes took effect on 21 November 2025, the legal minimum bonus comes from the Code on Wages, 2019, which replaced the 1965 Bonus Act. An employee qualifies with monthly wages up to ₹21,000 and 30 days of work in the year, if the establishment employs 20 people or more. The rate is 8.33% at the least and 20% at the most, set by the profit available for bonus, and it is applied to a wage of ₹7,000 a month or to the minimum wage, whichever is more.

For a year that ended on 31 March 2026, the bonus must be paid within eight months, by 30 November 2026, and by credit to the employee's bank account. Anything an employer pays above this, whether called a Diwali bonus, ex gratia or a performance bonus, is its own choice. The tax rule is the same for all of them, and the Diwali money guide shows how much of a bonus is left after tax at different salaries. The CTC break-up calculator works out the statutory bonus on your own wages.

How much cash or gift can an employer give an employee at Diwali?

No law caps what an employer may give. What the law does is decide, at each amount, whether the employee pays tax on it, whether the employer can deduct it, and whether the way it is paid is allowed. Four amounts matter: ₹10,000, ₹15,000, ₹50,000 and ₹2 lakh. This table applies to every employer, government, company, firm or shop owner, for the tax year 2026-27.

Two of these limits are easy to misread. The ₹15,000 is a yearly total, not a per-gift figure, and "below ₹15,000" means ₹14,999 is the last safe amount. And the ₹2 lakh cash rule has no exception for salary or festivals: it is the receiver who is penalised, so an employee should not accept a large bonus in notes.

The same ₹20,000, given three ways

Suppose an employer sets aside ₹20,000 a head for Diwali, and the employee pays tax at the 20% slab, plus 4% cess, which makes 20.8%.

At the 30% slab the saving is ₹4,680 rather than ₹3,120. The split works only if nothing else counted as a gift has been given in the same year, and only where the employee's income is above the ₹12 lakh level at which the new regime's rebate stops; below it there is no tax to save. Near that level a bonus can be almost entirely taxed away, which the Diwali money guide shows with figures.

Is DA, DA arrears or a Diwali bonus taxable?

Yes, all of them, as salary under section 15. A few points decide how.

• DA and its arrears. DA is fully taxable. Arrears for July to October 2026 belong to the same tax year, 2026-27, as the month they are paid in, so there is nothing to spread back and no relief to claim. The employer adds them to the year's estimate and deducts TDS over the remaining months.
• Arrears for an earlier year. Where salary for an earlier year arrives late, section 157, the old section 89, lets the tax be worked out as if each part had been paid in its own year. This matters for pay revisions, not for this DA instalment. If 8th Pay Commission pay is eventually given effect from 1 January 2026, the arrears for January to March 2026 will belong to 2025-26, and relief can be claimed on them by filing the prescribed form before the return.
• Ad hoc bonus and PLB. Salary in the year paid, with TDS under section 392. A ₹6,908 bonus does not by itself change anyone's tax position much, but added to arrears it can matter for someone close to ₹12 lakh of taxable income, where section 156's rebate ends.
• Pensioners. DR is part of pension, and pension is salary, so the same rules apply.

The income tax calculator shows the tax on your salary with the arrears and bonus added.

8th Pay Commission and DA merger: what is decided and what is not

The Cabinet approved the 8th Central Pay Commission's terms of reference on 28 October 2025. The release says the Commission is a temporary body of a chairperson, one part-time member and a member-secretary, and must report within 18 months of its constitution, with interim reports if needed. It also says that, going by the usual ten-year cycle, the effect of its recommendations "would normally be expected" from 1 January 2026.

Three things follow, and one does not.

• Until new pay is notified, DA continues every six months under the 7th Pay Commission formula. The July 2026 instalment, and the one from January 2027, are due on that basis.
• When new pay is fixed, DA earned up to that point is normally built into the new basic pay, and DA starts again from a low base. That is what happened from 1 January 2016, when the 7th Pay Commission's fitment factor of 2.57 absorbed the 125% DA then being paid.
• If the new pay takes effect from 1 January 2026, arrears will run from that date, and part of them will fall in an earlier tax year, which is where section 157 relief comes in.
• What does not follow: a separate merger of DA into basic pay now. The terms of reference, as released, say nothing about it, and the government has announced no such step.

What to watch next

• The Cabinet's decision on the July 2026 instalment, then the Department of Expenditure's order, which sets the payment month. The arithmetic says 3 points.
• The CPI-IW for August to December 2026. These, with January to July already published, decide the instalment from 1 January 2027. If the index simply stayed at July's 153.2 for the rest of the year, the formula would give 66.9%, so 66%. That is arithmetic, not a forecast; the actual figure depends on prices from here.
• 21 November 2026. For businesses whose accounts are audited, this is now the return due date for 2025-26 (CBDT Circular 07/2026). Bonus for 2025-26 paid by then is deductible in 2025-26 under the old Act's section 43B.
• 30 November 2026. The last date for statutory bonus for a year that ended on 31 March 2026.
• The 8th Pay Commission's report, due within 18 months of its constitution.

Frequently Asked Questions

What is the DA hike for July 2026? It has not been announced as of 24 October 2026. Applying the 7th Pay Commission formula to the Labour Bureau's CPI-IW for July 2025 to June 2026 gives 63.76%, which becomes 63% once the fraction is dropped, a rise of 3 points over the current 60%.

When will the DA hike be announced? There is no fixed date. The July instalment was approved on 16 October in 2024 and on 1 October in 2025. Once the Cabinet approves it, the Department of Expenditure issues the order, and the new rate is paid with the next salary along with arrears from 1 July.

How much DA arrears will I get? Your basic pay × 3% × the number of months from July. At Level 1 (₹18,000) that is ₹1,620 for three months or ₹2,160 for four; at Level 7 (₹44,900) it is ₹4,041 or ₹5,388. The tables above cover every level.

What is mahangai bhatta, and is it the same as DA? Yes. Mahangai bhatta is the Hindi name for dearness allowance, the part of pay that rises with prices. Pensioners receive the same thing as dearness relief.

How much is the Diwali bonus for central government employees in 2026? ₹6,908 for a full year's service, as the ad hoc bonus for 2025-26 under the order of 15 October 2026, for Group C and non-gazetted Group B staff not covered by a productivity bonus. Railway staff get a productivity bonus of 78 days' wages instead, up to ₹17,951.

Is a Diwali bonus taxable in India? Yes. A bonus of any kind is salary, taxed at your slab rate in the year it is paid, and the employer deducts TDS under section 392. Under the new regime no tax is payable if total taxable income stays within ₹12 lakh.

Is a gift from an employer to an employee taxable? Gifts in kind, vouchers and tokens are not taxed if they total less than ₹15,000 in the tax year, under Rule 15 of the Income-tax Rules, 2026, read with section 17 of the Act. Cash or a cheque is taxed in full, whatever the amount.

How much cash can an employer give an employee as a Diwali gift? Any amount by bank transfer, all of it taxable salary. In currency notes, anything above ₹10,000 to one person in a day costs the employer its tax deduction, and ₹2 lakh or more is not allowed at all; the employee who accepts it faces a penalty equal to the amount.

Do pensioners get the DA hike? Yes, as dearness relief, at the same rate and from the same date. On the minimum pension of ₹9,000, 3 points is ₹270 a month.

Will DA be merged with basic pay under the 8th Pay Commission? No separate merger has been announced, and the Commission's terms of reference do not mention one. DA is normally folded into the new basic pay when a pay commission's pay takes effect, and then restarts.

Sources

The rules and figures in this article can be checked against these official sources.

• Cabinet approves DA and DR instalment from 1 January 2026: 2% over 58%, ₹6,791.24 crore a year (release ID 2253245, 18 April 2026) Ministry of Finance (Press Information Bureau)
• Cabinet approves DA and DR instalment from 1 January 2025: 2% over 53%, ₹6,614.04 crore a year (release ID 2116182, 28 March 2025) Press Information Bureau
• Cabinet approves DA and DR instalment from 1 July 2025: 3% over 55%, ₹10,083.96 crore a year (release ID 2173541, 1 October 2025) Press Information Bureau
• Cabinet approves DA and DR instalment from 1 July 2024: 3% over 50%, ₹9,448.35 crore a year (release ID 2065315, 16 October 2024) Ministry of Finance (Press Information Bureau)
• Consumer Price Index for Industrial Workers (2016=100): monthly press releases Labour Bureau, Ministry of Labour and Employment
• CPI-IW for June 2026: 151.9, year-on-year inflation 4.76% (press release of 31 July 2026) Labour Bureau
• CPI-IW for July 2026: 153.2, year-on-year inflation 4.57% (press release of 31 August 2026) Labour Bureau
• Grant of Non-Productivity Linked Bonus (ad hoc bonus) for 2025-26: 30 days on a ₹7,000 ceiling, ₹6,908 (O.M. F. No. 7/24/2007/E III(A), 15 October 2026) Department of Expenditure, Ministry of Finance
• Cabinet approves Productivity Linked Bonus of 78 days to railway employees: ₹2,009.61 crore, up to ₹17,951 each (release ID 2323256, 14 October 2026) Press Information Bureau
• Cabinet approves Terms of Reference of the 8th Central Pay Commission (release ID 2183289, 28 October 2025) Press Information Bureau
• The four labour codes made effective from 21 November 2025 Ministry of Labour and Employment, through the Press Information Bureau
• Income-tax Act, 2025, section 15: salaries Income Tax Department
• Income-tax Act, 2025, section 17: perquisites Income Tax Department
• Income-tax Rules, 2026, rule 15: valuation of perquisites Income Tax Department
• Income-tax Act, 2025, section 32: other deductions, including bonus to employees Income Tax Department
• Income-tax Act, 2025, section 34: general conditions for allowable deductions Income Tax Department
• Income-tax Act, 2025, section 36: expenses not deductible, including cash payments above ₹10,000 in a day Income Tax Department
• Income-tax Act, 2025, section 37: deductions allowed only on actual payment Income Tax Department
• Income-tax Act, 2025, section 156: rebate of income-tax Income Tax Department
• Income-tax Act, 2025, section 157: relief for arrears of salary Income Tax Department
• Income-tax Act, 2025, section 186: receipts of ₹2 lakh or more in cash Income Tax Department
• Income-tax Act, 2025, section 392: tax deducted at source on salary Income Tax Department
• Income-tax Act, 2025, section 451: penalty for receiving cash against section 186 Income Tax Department
• CGST Act, 2017, Schedule I: supplies made without consideration CBIC
• CGST Act, 2017, section 17: blocked credits CBIC
• CBDT Circular No. 07/2026 (28 September 2026): return due date for audit cases, AY 2026-27, extended to 21 November 2026; audit report to 21 October 2026 Central Board of Direct Taxes