NEW DELHI: The Centre on Tuesday increased dearness allowance and dearness relief by 1 per cent to 5 per cent, benefiting 50 lakh employees and 61 lakh pensioners.

This decision was taken at the Union Cabinet meeting chaired by Prime Minister Narendra Modi.

"Release of additional installment of DA is an increase of 1 per cent over the existing rate of 4 per cent of the basic pay/pension, to compensate for price rise," according to an official statement.

The new rate will be applicable from July 1.

The combined impact on the exchequer on account of both DA and DR would be Rs 3,068.26 crore per annum and Rs 2,045.50 crore in the financial year 2017-18 (for a period of 8 months from July 2017 to February 2018).

This move will benefit about 49.26 lakh central government employees and 61.17 lakh pensioners, it said.