A major update has come out regarding the 8th Pay Commission. According to a report the new pay commission is likely to come into effect from 1 January 2028. Experts believe this could become one of the biggest financial decisions in India’s history. At the CII India@2025 Summit Neelkanth Mishra a member of the Prime Minister’s Economic Advisory Council warned that the total cost of the new pay and pension revisions may rise from Rs. 4 lakh crore to nearly Rs. 9 lakh crore once the arrears for five quarters are added. He said both the central and state governments will face a “very large fiscal challenge.”

What the reports say
According to a Business Today report:


The extra yearly cost of salaries and pensions alone could be Rs. 4–5 lakh crore starting from FY28–29.
Apart from this arrears for the five quarters between January 2026 and March 2028 may reach Rs. 3.5–4 lakh crore. This will be a one-time very large payout.
This means the total financial impact in the first year could be around Rs. 7.5–9 lakh crore which is 7 to 8 times more than the Seventh Pay Commission.

The main reason for this huge increase is the already high salary-pension base of Rs. 11–12 lakh crore along with the possibility of a 2.5–3 times fitment factor being recommended.

What the Government has said
The government has clarified that the 8th Pay Commission will cover pay allowances pensions and all related components. In the Rajya Sabha Minister of State for Finance Pankaj Chaudhary confirmed that pension revision is also part of the commission’s work. This has brought relief to millions of pensioners who were unsure about the changes.
However the government also said that for now there is no plan to merge DA (Dearness Allowance) and DR (Dearness Relief). Any such decision will only be considered after the 8th Pay Commission submits its report. At the same time DA is expected to cross 50 per cent by mid-2026.

Relief for central government employees
Overall around 50 lakh central government employees and 69 lakh pensioners are likely to benefit from the new pay commission. But for the country’s economy this will be a challenging balancing act.
The commission is expected to submit its report in 2027 and the new structure may start from 2028. Experts say this will be a major test of the governments financial management. As Neelkanth Mishra noted “FY28 will be an important fiscal turning point for India.”