House Rent Allowance

The recommendations of the 7th Pay Commission pertaining to allowances of central government employees had been approved by the Union Cabinet in 2017. However, some modifications have been implemented to the recommendations. The new rates have been made effective from 1 July 2017. Over 48 lakh central government employees have been enjoying the benefits of the newly implemented rates. As per the decision of the government, 12 out of 53 allowances that were proposed to be abolished in the 7th Pay Commission, has not been abolished. More than 1 lakh employees who belong to certain posts in Defense, Railways, Scientific Departments, and so on have been benefitting from the retention of these allowances. The cost for the additional financial implication of the recommendations of the 7th Pay Commission along with the new modifications is estimated to be around Rs.30,748.23 crore p.a.

House Rent Allowance (HRA)

There has been a recommendation by the 7th Central Pay Commission to lower the percentage of HRA for all categories of employees who work for the Central Government. Earlier, the HRA was paid at the rate of 30% of the Basic Pay for Class X cities, 20% for Class Y cities, and 10% for Class Z cities. The percentages have been rationalised to 24% of the Basic Pay for Class X cities, 16% for Class Y cities, and 8% for Class Z cities. A city with a population of 50 lakh and more qualifies as a Class X city, while cities with a population of 5 lakh to 50 lakh are considered as Class Y cities, and those with populations under 5 lakh are regarded as Class Z cities.

However, since the revised HRAs might not be sufficient for the employees that fall under a lower pay bracket, the 7th Central Pay Commission decided that the HRA should not be less than Rs.5,400 for Class X cities, Rs.3,600 for Class Y cities, and Rs.1,800 for Class Z cities. These amounts have been calculated at 30%, 20%, and 10% of the minimum pay of Rs.18,000. The 7th Central Pay Commission has also made a recommendation to revise the rate of House Rent Allowance to 27%, 18% and 9% for Class X, Class Y, and Class Z cities, respectively when Dearness Allowance is more than 50%. A recommendation has also been made to further revise the percentage of HRA to 30%, 20% and 10% for Class X, Class Y and Class Z cities when Dearness Allowance exceeds 100%.

So far as the issuance of allowance to the current employees of Central Government is concerned, House Rent Allowance is the most crucial factor as it is offered so that the personnel are compensated for living in a rented house. HRA regulations are permitted for receiving allowance even if the personnel is residing in his/her own house.

A number of changes were made in the 6th Central Pay Commission so far as regulations regarding House Rent Allowance were concerned. The percentages were made on basic pay depending upon the classification of cities. 30% of HRA was prescribed as the rate for Class X cities, 20% for Class Y cities, and 10% for Class Z cities. Employees of the Central Government are forecasting changes in the percentage rates based on the classification of cities.