The Centre has officially approved the Terms of Reference (ToR) for the 8th Pay Commission, paving the way for a significant revision in the pay structure, pensions, and allowances of central government employees and pensioners. This development has generated anticipation across the country as the new pay scale is expected to come into effect from January 1, 2026, following the regular 10-year revision cycle.
Major Salary and Pension Hike Expected for Over 1.2 Crore Central Government Employees and Pensioners
According to reports, the commission’s primary task is to ensure fair compensation for employees in line with inflation and changing economic conditions. It will evaluate the current salary matrix, existing allowances, and pension structures, while recommending revisions that balance employee welfare with fiscal responsibility.
A major focus of the 8th Pay Commission will be the fitment factor, which determines the uniform multiplier applied to existing pay scales. In the 7th Pay Commission, this factor was fixed at 2.57, meaning an employee earning ₹15,000 saw their basic pay rise to ₹38,550. If the new commission recommends increasing the factor to 3.0, the same employee’s basic pay could reach ₹45,000 — resulting in a substantial hike.
The new structure is likely to directly benefit over 50 lakh employees and 70 lakh pensioners, significantly impacting their take-home income and post-retirement earnings. This revision will also influence dearness allowance (DA), dearness relief (DR), and other benefits that are calculated as a percentage of basic pay.
Finance Ministry has already raised DA to 58% of basic pay
Meanwhile, the Finance Ministry has already raised DA to 58% of basic pay as of July 1, 2025. However, when the 8th Pay Commission takes effect, the DA and DR will reset to zero and then gradually increase again based on the All-India Consumer Price Index (AICPI).
In addition to salary and pension hikes, other components such as House Rent Allowance (HRA), Transport Allowance, and Overtime Pay will also be revised. The government is expected to review more than 100 allowances to align them with current economic realities and job demands.
Financial experts advise employees to plan carefully, as higher salaries also mean higher tax liabilities. Investing wisely and diversifying financial portfolios will be essential to manage the impact of the expected pay rise.
The announcement of the 8th Pay Commission has been widely welcomed, especially ahead of the festive season, as it promises enhanced financial stability and improved living standards for millions of families across India.
