Nearly 1.2 crore central government employees and pensioners have been waiting a long time for the 8th Pay Commission to take effect. After the 7th Pay Commission wrapped up last year, the new commission was expected to roll out from 2026, but that timeline has slipped. The committee tasked with deciding salary and pension hikes under the 8th Pay Commission has already been set up, and most estimates now point to the revised pay structure and fitment factor being fully in place by the middle of 2027.
At the heart of this exercise sits the fitment factor, the single element that decides how much salaries will grow for employees and how much monthly pensions will rise for pensioners. Alongside it, there are expectations tied to allowance benefits, arrears and tax implications.
How DA and DR Are Being Calculated
In the latest development, the All India Defence Employees Federation (AIDEF) has sought a revision in the way dearness allowance (DA) and dearness relief (DR) are calculated on basic pay. The government usually revises DA twice a year for a six-month period, broadly to offset inflation and ease the cost of living for its employees.
The federation argues that the All India Consumer Price Index-Industrial Workers (AICPI-IW), which is central to working out DA and DR, was revised in 2022-23 and does not accurately capture the impact of rising food commodity and agricultural prices. It pointed out that food and beverages carry a 36.75% weightage in the revised CPI basket, compared with 45.86% in the 2012 base year index.
The federation has also demanded that the CPI basket be reworked to give greater weightage to segments such as housing, healthcare, transport, communication, recreation and digital services.
The DA formula differs for central government and central PSU employees.
- Central government employees: ((Average All-India Consumer Price Index (base year 2001 = 100) for the past 12 months - 115.76) / 115.76) * 100
- Central PSU employees: ((Average All-India Consumer Price Index (base year 2001 = 100) for the past 3 months - 126.33) / 126.33) * 100
DA currently stands at 60%, raised in April 2026 from the earlier 58%. Under the 7th Pay Commission, the minimum salary is Rs 18,000 per month. At 58% DA, the minimum salary would have risen by Rs 10,440 to Rs 28,440 (Rs 18,000 x 58/100) against the minimum pay of Rs 18,000. At 60%, the minimum salary would climb by Rs 10,800 to Rs 28,800 (Rs 18,000 + 60/100) over the minimum basic pay. Notably, the 7th Pay Commission DA is not expected to carry forward into the 8th Pay Commission; it will change altogether.
How Much Arrears Could Land
If the 8th Pay Commission is implemented by mid-to-late 2027 but pay is revised with effect from January 1, 2026, many employees will become eligible for roughly 20 to 24 months of arrears.
Taking a 1.92 fitment factor for the 8th Pay along with 24 months of arrears, the amount could range from Rs 2 lakh to nearly Rs 17 lakh. The actual benefit, however, will depend on the employee and their grade level. The likely arrears across pay levels work out as follows:
- Level 1: current basic Rs 18,000, 24-month arrears Rs 2.0 to 2.3 L, 30-month arrears Rs 2.6 to 2.9 L
- Level 4: current basic Rs 25,500, 24-month arrears Rs 3.3 to 3.7 L, 30-month arrears Rs 4.2 to 4.8 L
- Level 5: current basic Rs 29,200, 24-month arrears Rs 3.7 to 4.2 L, 30-month arrears Rs 4.8 to 5.4 L
- Level 6: current basic Rs 35,400, 24-month arrears Rs 4.5 to 5.0 L, 30-month arrears Rs 5.7 to 6.4 L
- Level 7: current basic Rs 44,900, 24-month arrears Rs 5.6 to 6.3 L, 30-month arrears Rs 7.2 to 8.0 L
- Level 8: current basic Rs 47,600, 24-month arrears Rs 5.9 to 6.7 L, 30-month arrears Rs 7.6 to 8.5 L
- Level 10: current basic Rs 56,100, 24-month arrears Rs 7.2 to 8.1 L, 30-month arrears Rs 9.3 to 10.3 L
- Level 11: current basic Rs 67,700, 24-month arrears Rs 8.6 to 9.6 L, 30-month arrears Rs 11.0 to 12.3 L
- Level 12: current basic Rs 78,800, 24-month arrears Rs 9.9 to 11.1 L, 30-month arrears Rs 12.7 to 14.2 L
- Level 13: current basic Rs 1,23,100, 24-month arrears Rs 15.2 to 16.9 L, 30-month arrears Rs 19.5 to 21.7 L
- Level 14: current basic Rs 1,44,200, 24-month arrears Rs 17.8 to 19.7 L, 30-month arrears Rs 22.8 to 25.3 L
The Tax Rules on Arrears
Any arrears credited under the 8th Pay Commission will count as taxable income for employees. That said, Section 89(1) relief is expected to apply under the 8th Pay Commission just as it did under previous pay commissions, letting an employee claim a tax benefit and avoid paying extra tax simply because of a large one-time arrears payout.
To claim this benefit, employees will need to file Form 10E. One caveat worth noting: whether Section 89 relief stays available in every situation under the new tax regime should be checked once the final arrears notification is issued. Official guidance is still awaited.
What the Fitment Factor Predictions Say
The fitment factor is the deciding element in setting the basic salary matrix under the 8th Pay Commission. It is the multiplier applied to basic pay, using the formula: 8th Pay basic pay = 7th Pay basic salary x fitment factor.
At present, the lowest predicted fitment factor under the 8th Pay Commission is 1.92, while the highest estimate is 3.83. More recently, the Indian Railway Technical Supervisors Association (IRTSA) has recommended different fitment factors depending on an employee's pay grade, with its highest prediction reaching 4.38. The Bharatiya Pratiraksha Mazdoor Sangh, meanwhile, has suggested a fitment factor of 4 on a minimum pay of Rs 72,000.
How Big the Salary Hikes Could Be
Taking a fitment of 1.92 to 3.83, basic pay under the 8th Pay Commission could rise by up to 92%, landing somewhere between Rs 34,560 and Rs 68,940 per month over the current basic pay. The current basic pay under the 7th Pay Commission is Rs 17,000.
Using a 4.38 fitment, the basic pay for a Level 17 grade employee is said to be around Rs 2.25 lakh per month under the 7th Pay Commission. Once the 8th Pay Commission applies a 4.38 fitment, that salary could jump 338% to Rs 9,85,500 per month. At a fitment factor of 4, the basic salary for a Level 1 grade employee could rise 300% from Rs 18,000.
