Dearness Allowance (DA) Calculation for PSU Employees – Q3 2026–27 (Oct 2026 to Dec 2026)

Summary: Dearness Allowance (DA) for PSU employees for the 3^rd quarter of financial year 2026-27, covering October 2026 to December 2026, has been computed at 59.10%, compared with 55.70% for the preceding quarter, resulting in an increase of 3.40%. The computation is based on the Consumer Price Index for Industrial Workers (CPI-IW) figures of 151.90 for June 2026, 153.20 for July 2026 and 154.40 for August 2026. For DA computation, the published CPI-IW is multiplied by 2.88, producing adjusted CPI figures of 437.47, 441.22 and 444.67 respectively, with an average adjusted CPI of 441.12. Applying the prescribed formula [(441.12-277.33)/277.33] × 100 gives approximately 59.10%. The increase of 3.40% is stated to be the highest DA increase in the last two years. The article also reproduces the Labour Bureau’s CPI-IW press releases for August 2026 and June 2026, including the All-India group-wise indices. The August 2026 All-India CPI-IW stood at 154.4 points, up 1.2 points, while year-on-year inflation stood at 4.96%. For June 2026, CPI-IW stood at 151.9 points, up 1.1 points, with year-on-year inflation of 4.76%. The quarterly methodology is consistent with TaxGuru’s earlier explanation of PSU DA computation using the adjusted CPI and three-month average.

Introduction

As we know, Dearness Allowance (DA) is paid as a fixed percentage of the basic salary. For instance, if an employee’s basic salary is ₹50,000 per month and the DA rate is 30%, then the DA payable will be ₹15,000 per month. This amount is paid in addition to the basic salary and other allowances such as House Rent Allowance (HRA).

The Ministry of Labour and Employment publishes the Consumer Price Index (CPI), which is used as the benchmark for determining the applicable Dearness Allowance (DA) rate. The Ministry has released the CPI-IW figures for June 2026, July 2026, and August 2026 (copy of the circular attached).

Based on the CPI-IW indices published by the Ministry of Labour and Employment, the Dearness Allowance (DA) for the 3^rd quarter of the financial year 2026-27 (i.e., October 2026 to December 2026) has been computed at 59.10%, as against 55.70% (for the 2^nd quarter of 2026-27), reflecting an increase of 3.40%.

DA (Dearness Allowance) for recent quarters

As can be seen from above table, the increase in DA of 3.40% is highest in last 2 years.

The relevant CPI and DA% can be shown with the help of below diagram:

Methodology for Calculation of DA for Q3 2026-27

The methodology for calculation of DA for Q3 2026-27 is explained below:

For the purpose of Dearness Allowance (DA) computation, the adjusted CPI (i.e., Multiplied CPI) is taken as 2.88 times the published CPI. The average of the CPI for the last three months (immediately preceding the applicable quarter) is considered for the calculation. This methodology is also explained in TaxGuru’s DA calculation for PSU employees for Q2 2026-27. [TaxGuru](https://taxguru.in/finance/dearness-allowance-da-calculation-psu-employees-q2-2026-27-july-2026-sep-2026.html?utm_source=chatgpt.com)

Hence, the DA applicable for the 3^rd quarter of the financial year 2026-27 (i.e., Oct 2026 to Dec 2026) is computed as:

[(441.12-277.33)/277.33]*100 = 59.0596% ~ 59.10%

This DA in current quarter (Q3 2026-27) of 59.10% is higher than the corresponding DA of 55.70% in Q2 2026–27, resulting in an increase of 3.40% in DA for Q3 2026–27.

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Consumer Price Index for Industrial Workers (2016=100) – August, 2026

GOVERNMENT OF INDIA
MINISTRY OF LABOUR & EMPLOYMENT
LABOUR BUREAU

Shram Bureau Bhawan, Block No. 2,
Institutional Area, Sector 38 (West),
Chandigarh – 160036
Dated: 30.09.2026

F.No. 5/1/2021-CPI

Press Release

Consumer Price Index for Industrial Workers (2016=100) – August, 2026

1. Labour Bureau, an attached office of the M/o Labour & Employment, has been compiling Consumer Price Index for Industrial Workers every month on the basis of retail prices collected from 317 markets spread over 88 industrially important centres in the country. The index for the month of August, 2026 is being released in this press release.

2. The All-India CPI-IW for August, 2026 increased by 1.2 points and stood at 154.4 points (one hundred fifty-four point four).

3. Year-on-year inflation for the month of August, 2026 stood at 4.96% as compared to 3.16% in August, 2025.

Y-o-Y Inflation based on CPI-IW (General)

All-India Group-wise CPI-IW for July, 2026 and August, 2026

4. All-India Group-wise CPI-IW for July, 2026 and August, 2026:

CPI-IW: Groups Indices

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Consumer Price Index for Industrial Workers (2016=100) – June, 2026

GOVERNMENT OF INDIA
MINISTRY OF LABOUR & EMPLOYMENT
LABOUR BUREAU

Shram Bureau Bhawan, Block No. 2,
Institutional Area, Sector 38 (West),
Chandigarh – 160036
Dated: 31.07.2026

Press Release

Consumer Price Index for Industrial Workers (2016=100) – June, 2026

1. Labour Bureau, an attached office of the M/o Labour & Employment, has been compiling Consumer Price Index for Industrial Workers every month on the basis of retail prices collected from 317 markets spread over 88 industrially important centres in the country. The index for the month of June, 2026 is being released in this press release.

2. The All-India CPI-IW for June, 2026 increased by 1.1 points and stood at 151.9 points (one hundred fifty-one point nine).

3. Year-on-year inflation for the month of June, 2026 stood at 4.76% as compared to 2.55% in June, 2025.

Y-o-Y Inflation based on CPI-IW (General)

All-India Group-wise CPI-IW for May, 2026 and June, 2026

4. All-India Group-wise CPI-IW for May, 2026 and June, 2026:

CPI-IW: Groups Indices