With the implementation of 7th Pay Commission (CPC) from July 1st 2017, over 48 Lakh central government employees will benefit from House Rent Allowance (HRA).
Although the HRA percentage has been lowered, it is subjected to minimum fixation of HRA of Rs 5,400 for X, Rs 3,600 for Y and Rs 1,800 for Z category of cities for Level 1, 2, and 3 employees. This minimum HRA floor rate has been calculated on the basis of previous HRA rates i.e. 30%, 20%, 10%. This has been made possible due to the revision of basic pay scale after multiplying by a factor of 2.57 and then rounded off. For example for level 1, the earlier basic pay scale was Rs 7,000 and HRA was Rs 2,100 for X Category, Now the revised basic pay scale is Rs 18,000 (7000×2.57=17,990) and HRA is Rs5400
Considering that the grade pay of Level 1 central government employees is Rs 18,000, there has been a hike of Rs.1,080/- for X, Rs.720/- for Y and Rs.360/- for Z Cities. There are approximately 7.5 lakh employees in this bracket and they will enjoy a 157% hike in the HRA component of their salaries.
HRA as per the previous pay commission was 30%, 20%, 10% for cities categorized in X, Y, Z tiers. Cities with population of 50 lakh and above are categorized as X, cities with population between 5 lakh to 50 lakh are categorized as Y and cities with population less than 5 lakh are categorized as Z. With the 7th Central Pay Commission coming into the picture, the HRA percentage has been lowered to 24%, 16% and 8% for X, Y, Z category respectively.
The new House Rent Allowance (HRA) modification will bring atleast 106% to 157% hike in the HRA calculation of central government employees at different levels. This HRA hike will be visible in the July take home salaries of central government employees. The government is gearing up to render these benefits in the July salaries itself rather than delaying the implementation.