As the central budget for 2026-27 approaches, the attention of millions of central employees and pensioners across the country is focused on the upcoming budget by Finance Minister Nirmala Sitharaman. The budget to be presented on February 1, 2026, is likely to be very important for government employees, with expectations of major announcements regarding the establishment of the eighth pay commission.
The biggest and long-standing demand of central employees is the establishment of the eighth pay commission. Generally, a new pay commission is implemented every ten years. The seventh pay commission was implemented in 2016 and its term is ending in 2026. Therefore, it is speculated that a committee may be appointed or preliminary funds announced for the establishment of the eighth pay commission in the 2026 budget. If such a decision is made, the current minimum wage could increase from 18,000 rupees to 26,000 rupees, as estimated by employee unions.
Along with the Pay Commission, the issue of the fitment factor is equally important. Currently, the fitment factor for central employees is 2.57. However, employee unions have demanded it be increased to 3.68. If the fitment factor increases, there will be a significant rise not only in the basic salary but also in various allowances and pensions. Therefore, everyone is watching whether the government gives positive indications about this in Budget 2026.
There is a great expectation regarding the increase in Dearness Allowance (DA). The announcement of the DA increase for January 2026 is likely to happen during this period. According to experts, considering the current inflation rate, the government may increase the DA by 3 to 4 percent. It is likely that necessary provisions will be made in the budget for this, directly benefiting approximately 50 lakh central employees and 65 lakh pensioners.
The pension issue is also expected to be important in this year's budget. The government has recently approved the Unified Pension Scheme (UPS), and this scheme will be implemented from April 2026. In Budget 2026, a separate financial provision and a clear outline for implementation of this scheme are likely to be announced. However, many employee unions are still demanding the re-implementation of the old pension scheme (OPS), and the government's stance on this is expected to be clarified.
Besides, the issue of tax exemptions for middle-class government employees is also important. There is a demand to increase the limit of 1.5 lakh rupees available under Section 80C to 2.5 lakh rupees. Also, in the backdrop of rising inflation, there is an expectation to increase the standard deduction from 50,000 rupees to 75,000 or 1 lakh rupees. Employees are expressing hope that the government will make some favorable decisions regarding HRA and other allowances. Overall, Union Budget 2026 is likely to be decisive for central employees, with expectations for many important decisions from the eighth pay commission to tax exemptions being expressed at all levels.