It will benefit 50 lakh government employees and 61 lakh pensioners of the central government and will come into effect from 1 January 2018.
Dearness allowance and dearness relief are provided to employees and pensioners to neutralise the impact of inflation on their earnings.
The existing dearness allowance - paid as proportion of the basic pay of central government employees or pension - is 5%.
According to the government, the increase in dearness allowance is made in accordance with the formula based on the recommendations of the 7th Central Pay Commission.
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