The move, will benefit about 50 lakh serving employees and 30 lakh pensioners.
The decision to raise the DA will impose an additional annual burden of Rs 8,629.20 crore on the exchequer, Information and Broadcasting Minister Manish Tewari told reporters after the meeting of the Union Cabinet.
Taking into account the additional outgo for the January- March period, the total burden during the current financial year would be Rs 10,067 crore.
The government had raised the DA by 7 per cent in September last year to 72 per cent of the basic pay, effective July 1, 2012.
The government periodically hikes the DA which is linked to the consumer price index (CPI) for industrial workers.
(With inputs from PTI)