When will the 8th Pay Commission take effect?

The Cabinet has approved the Terms of Reference, which lets the commission start detailed work. A 2026 rollout is the working expectation, but the timeline still depends on when the commission submits its report and when the Cabinet approves implementation. Budget announcements, staff consultations, and phasing plans will shape the exact date. Investors should track Union Budget documents and official circulars for milestones in FY26–27.

How big could the salary hike be and who will get it?

Public projections indicate a 20–35% increase once recommendations are implemented, but the final figure will be set by the commission and cleared by the Cabinet. Coverage typically includes central government employees and pensioners. Pay revisions can influence public bodies and later inform state-level panels. The changes affect basic pay and linked allowances, which together decide take-home income, savings, and the consumption impulse for the wider economy.

What is the 8th CPC fitment factor and why does it matter?

The 8th CPC fitment factor converts recommended increases into the new basic pay matrix. A higher factor raises basic pay and scales allowances that reference it, shaping both take-home and the pension base. The factor will be finalised by the commission, then approved by the Cabinet. Until then, discussions about level-wise adjustments are expectations only. Investors should watch for the draft structure, bands, and any phased rollout approach.

Will DA merge in 2026 and how would that affect take-home pay?

A DA merger in 2026 is under consideration, not confirmed. If approved, accumulated Dearness Allowance would be folded into basic pay at a defined date. That can step up the base and lift linked allowances and pensions, raising monthly payouts. It also increases the government’s recurring cost. The impact on take-home will depend on the merger formula, cut-off date, and the final set of allowances cleared alongside 8th Pay Commission recommendations.

Law and Government

8th Pay Commission on December 22: Cabinet Clears ToR; Pay Hike Projections and 2026 DA Merger in FO

ByHuzaifa Zahoor December 22, 2025December 22, 2025

The 8th Pay Commission is now live on policy desks after the Cabinet cleared the Terms of Reference on December 22. Projections point to a 20–35% increase in central government salary, with debate over a 2026 DA merger. For investors, that mix signals near-term consumption support and medium-term fiscal and bond risks in FY26–27. We explain what the approval covers, how the 8th CPC fitment factor may be debated, and what a DA merger could change for pay and pensions.