7th Pay Commission – How to calculate HRA and Transport Allowance

| July 3, 2016

7th Pay Commission HRA and Transport Allowance – How these allowances are to be calculated from 1st January 2016 ?

After Cabinet provided its approval for 7th Pay Commission recommendations, press release was issued by Govt to the effect that Government has decided to constitute a Committee headed by Finance Secretary for further examination of the recommendations of 7th Pay Commission on Allowances and that allowances at the existing rates will be paid till the submission of report by the Committee.

The press release of the Govt in this context reads as follows

“The Commission examined a total of 196 existing Allowances and, by way of rationalization, recommended abolition of 51 Allowances and subsuming of 37 Allowances. Given the significant changes in the existing provisions for Allowances which may have wide ranging implications, the Cabinet decided to constitute a Committee headed by Finance Secretary for further examination of the recommendations of 7th CPC on Allowances.  The Committee will complete its work in a time bound manner and submit its reports within a period of 4 months. Till a final decision, all existing Allowances will continue to be paid at the existing rates”

We are of the opinion that as per the decision of the Cabinet, HRA and Transport Allowances with effect from 1st January 2016 will be the same as the quantum of these allowances paid presently.

Why HRA should not be calculated on the basis of New 7th CPC revised Pay and old HRA Rates ?

It could be seen that some blogs suggest that HRA is to be calculated on the basis of new 7th CPC Pay with old HRA Rates ( 30%, 20% and 10%). There are suggestions to the extent that new HRA from 1st January 2016 will be based on new 7th CPC Pay by applying the 7th CPC recommended HRA rates (24%, 16% and 8%).

However, both the methods of calculation of HRA are not correct, since both these methods will end up in more HRA from 1st January 2016 than the quantum of HRA that was received up to December 2015.

Method of Calculation HRA Rate Basic Pay HRA (Rs.)
Calculation of HRA using present HRA Rate with Pre-Revied Basic Pay 30% 29200 8,760
HRA on the basis of new 7th CPC Pay with old HRA Rates 30% 75600 22,680
HRA based on new 7th CPC Pay by applying the 7th CPC recommended HRA rates 24% 75600 18,144

The very intention of the Govt by deferring the decision on allowances is to provide same quantum of house rent allowance even after approval of 7th Pay Commission till it gets a decision from the Committee which has been appointed to examine the recommendations on allowances by 7th CPC.

However, it is now left with Staff Side Associations to justify before the Committee on the need for increase in HRA and Transport Allowances given the steep increase in House Rent and Transport Cost

Source:- Gconnect

Category: News, Seventh Pay Commission

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