8th Pay Commission: What Is Expected Salary Hike, Pension Revision - Experts Reveal | EXCLUSIVE

Prime Minister Narendra Modi has approved the formation of the 8th Pay Commission. Speculation is rife about potential pension hikes, Dearness Allowance, and National Pension Scheme revisions for central government employees and pensioners.

Looking at the previous trends of the 7th Pay Commission, it is likely that there will be a significant increase in salary and pension to overpower the existing inflation. 

PM Approves Formation Of 8th Pay Commission

“We are all proud of the efforts of all Government employees, who work to build a Viksit Bharat. The Cabinet's decision on the 8th Pay Commission will improve quality of life and give a boost to consumption.” PM Modi posted on X.

Pension Hike Likely To Be Substantial? 

“The 7th Pay Commission implemented a fitment factor of 2.57, leading to an average pension hike of 23-25 per cent and setting the minimum pension at Rs 9,000.”,  said Nihal Bhardwaj, Senior Associate at SKV Law Offices.

“For the 8th Pay Commission, there are expectations of a fitment factor between 3.0 and 3.2, which could result in a 25-30 per cent average pension increase. This would raise the minimum pension to Rs12,000–Rs14,000, ensuring that pensioners are better equipped to manage inflationary pressures. Furthermore, the graded pension enhancement for senior citizens above 80 years may also see upward adjustments.” he added.

The government will need a substantial amount of money to increase the monetary amount. “They have to find new ways to find revenue to accommodate this.” said Bimal Jain, Founder, A2Z Taxcorp LLP.
Things are not positive right now, and the increase will take time, but it will happen.

Prabhakar K S, Founder of Shree Tax Chambers said, “If one goes by the previous two commissions’ recommendations – the seventh pay commission had recommended a minimum pay of Rs. 18,000 and a maximum pay of 2,50,000 per month and its preceding commission had recommended Rs. 7,000 and Rs. 90,000 – the eighth pay commission’s bandwidth is expected at Rs. 35,000 and Rs. 3,25,000.”
 

DA Revisions Likely

Currently, Dearness Allowance (DA) is revised semi-annually. As per the latest development, the DA and Dearness Relief (DR) to Central Government employees and pensioners has increased by 3 per cent from First July, 2024, over the existing rate of 50 per cent of the Basic Pay/Pension, to compensate against the price rise.

It is speculated the DA will increase further under the 8th Pay Commission.  “The 8th Pay Commission is likely to recommend a reset of DA to 0% from January 2026, aligning with the new pay structure, and continuing regular adjustments.”, said Bharadwaj.

The current inflation in the country is around 6 to 7 percent, which is the bare minimum increase expected by employees. “If this is not compensated they are losing out the basic value of the salary they are drawing.” said Jain. “While there is an expectation of 14 to 15 per cent, realistically, you can expect an 8 to 10 per cent increase in DA.” he added.

What About The National Pension Scheme?

There are speculations about what will happen to the National Pension Scheme (NPS), “Something might change, discussions are happening but you can't say. They do want to revamp NPS.”, said Jain.

One issue is a lack of finances, so they won't take any immediate steps. “They have to find new ways to find revenue to accommodate this.”, Jain added.

“Though the upcoming decadal exercise, followed by a five-year exercise of implementing the 16th Finance Commission’s recommendations is expected to boost consumption and economic activities, it will have a huge impact on the Central Government’s revenue expenditures and overall GDP numbers,” said Prabhakar KS.
 

Way Forward 

While final recommendations will take to formulate, the 8th Pay Commission is expected to adopt a forward-looking approach, balancing fiscal prudence with the needs of pensioners and employees.

The central government may seek to ensure that pensions and DA adequately reflect inflation trends, reinforcing the financial well-being of retirees in the coming decade.