Dearness Allowance (DA) for PSU Employees for July 2026 – September 2026: Full Working and Explanation

Dearness Allowance (DA) is a crucial component of the salary structure for Public Sector Undertaking (PSU) employees, designed to neutralise the impact of inflation on real income. For the 2nd quarter of the financial year 2026-27, i.e., from July 2026 to September 2026, the DA rate for PSU employees has been revised to 55.70%, up from 54.10% in the 1st quarter of 2026-27.

This article explains:

• How DA operates as a percentage of basic pay
• The stepwise calculation of DA for Q2 2026-27 using CPI-IW
• The trend of DA rates over recent quarters
• Key CPI-IW data points released by the Ministry of Labour & Employment that drive this revision

1. Concept of Dearness Allowance for PSU Employees

Dearness Allowance is paid as a fixed percentage of the basic salary. It is intended to offset the rise in the cost of living, measured through the Consumer Price Index for Industrial Workers (CPI-IW).

1.1 How DA Is Calculated on Basic Pay – Simple Illustration

DA is applied directly as a percentage on the basic pay of the employee.

For example:

• Suppose Mr. Sharma is a PSU employee with a basic pay of ₹62,000 per month
• The DA rate notified for a particular quarter is 55.70%

Then, DA for that quarter will be:

• DA amount = 55.70% of ₹62,000
• DA amount = 0.5570 × ₹62,000 = ₹34,534 per month

Thus, Mr. Sharma’s monthly salary components (simplified) would appear as:

• Basic Pay: ₹62,000
• DA @ 55.70%: ₹34,534
• Plus: other allowances such as House Rent Allowance (HRA), etc.

Note: DA is always calculated on the basic pay, and then added to basic pay and other allowances to arrive at the gross salary.

2. Role of CPI-IW in DA Determination

The Ministry of Labour & Employment, through the Labour Bureau, periodically publishes the Consumer Price Index for Industrial Workers (CPI-IW). This index is the benchmark for revising DA.

For each quarter, the DA rate is computed on the basis of:

1. The CPI-IW data for the last three months immediately preceding the quarter, and
2. A prescribed multiplication factor and base index used in the standard formula for DA computation.

For the 2nd quarter of FY 2026-27 (July 2026 – September 2026), the relevant CPI-IW indices are those for:

• March 2026
• April 2026
• May 2026

These indices were notified through official Labour Bureau press releases.

3. Key CPI-IW Data Relevant for Q2 2026-27

The Labour Bureau has issued CPI-IW figures for multiple months. For DA calculation relating to Q2 2026-27, the following CPI-IW values are relevant:

These indices are with base year 2016 = 100 and are later adjusted using a multiplication factor for DA calculations applicable to PSU employees.

4. DA Percentage for Q2 2026-27 and Comparison with Earlier Quarters

Based on the above CPI-IW data and prescribed methodology, the Dearness Allowance for PSU employees for the 2nd quarter of FY 2026-27 (July 2026 – September 2026) has been determined at:

• DA rate: 55.70%

This is an increase over the DA for Q1 2026-27 (April 2026 – June 2026), which stood at 54.10%.