7th Pay Commission: Committee on allowances to recommend substantial increase in HRA

| September 29, 2016

New Delhi: In what could bring cheer to millions of central government employees and pensioners, the committee on allowances is likely to purpose more than double House Rent Allowance (HRA), with the increases ranging between 106% and 122% for all categories of employees.

House Rent Allowance, which the biggest gain for employees from the 7th Pay Commission as central government employees get only 14.27 per cent hike in basic pay effective from January 1, 2016

The HRA hike is likely to happen by October this year including all allowances, sources said.

The committee on allowances is likely to stick with the 7th Pay Commission’s recommendations on allowances.

modi and jaitleyThe 7th Pay Commission recommended the rates at which HRA is to be paid to 24%, 16% and 8% respectively for Class X, Y and Z cities and towns respectively of new Basic pay (pay in the pay band plus grade pay multiplying by the fitment factor of 2.57).

The existing rates of HRA for these cities and towns were 30%, 20% and 10% of Basic pay (pay in the pay band plus grade pay) respectively.

So how does the HRA component rise so dramatically when the HRA rates have actually come down?

The answer lies in the fact that HRA is calculated on basic pay alone. While basic pay will go up more than two-and-a-half times.Thus even getting a smaller fraction of the much higher new basic pay as HRA yields well over the current levels of the allowance.

Class X towns are those with populations of over 50 lakh, Class Y are those whose population is between 5 lakh and 50 lakh while the Z class towns are those with populations under 5 lakh.

The Commission also recommends that the rate of HRA will be revised to 27 percent, 18 percent and 9 percent respectively when DA crosses 50 percent, and further revised to 30 percent, 20 percent and 10 percent when DA crosses 100 percent.

The committee on allowances headed by Finance Secretary Ashok Lavasa, which was set up in July this year, is looking into “the provision of allowances other than dearness allowance under the 7th Pay Commission recommendations”, and any other matter relevant to this issue. The committee was asked to submit report within four months.

In the wake of intense central government employees’ pressure following the 7th pay commission recommendations of abolishing 51 allowances and subsuming 37 others out of 196 allowances, the committee was set up to examine the recommendations on allowances of the pay panel.

The committee on allowances, already met with employees unions leaders on August 4 and September 1 respectively and the committee prepared its report, the central government employees’ unions leaders said.

“The committee on allowances is ready to submit its report even two months in advance, when the Finance minister calls up, the committee will submit its report.

The committee is likely to call on Finance Minister Arun Jaitley soon, if the political situation returns to normal,” official sources added.

The matters relating to pay and pension as decided by the government have been implemented with effect from January one this year.

“Until then, all such new allowances shall continue to be reckoned and paid at the existing rates under the terms and conditions prevailing in the pre-revised pay structure as if the existing pay structure has not been revised,” the finance ministry’s pay commission resolution issued on July 25 said.

Category: News, Seventh Pay Commission

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