7th Pay Commission: Final decision on allowances on June 28; HRA rate likely to be capped at 27%

New Delhi: The Union Cabinet may fix HRA rates between recommendations of AK Mathur panel and 6th CPC/existing, most likely at 27 percent in its next meeting on June 28.

Earlier, the Union Cabinet was expected to give its nod to the proposal on allowances, including HRA (House Rent Allowance) this week but it got delayed due to Finance Minister Arun Jaitley’s three-day visit to Moscow beginning June 21. He will back in the country by June 25.

If the Cabinet takes final call on June 28 then the central government employees will get revised allowances from July month salary.

As per sources, the Cabinet will take final decision on E-CoS' proposal on June 28. The Empowered Committee of Secretaries (E-CoS) set up to screen the Lavasa panel recommendations on allowances has already submitted its proposal to the Cabinet for approval.

A high-level committee headed by the Finance Secretary, Ashok Lavasa had on April 27 submitted its report to Finance Minister Arun Jaitley.

The Empowered Committee of Secretaries has reportedly given its view in favour of AK Mathur-led 7th Pay Commission recommendation, regarding decrease in house rent allowance (HRA) by 2-6 percent depending on type of cities.

However, it is widely expected that the Union Cabinet may fix HRA rates between recommendations of AK Mathur panel and 6th CPC/existing, most likely at 27 percent.

The 7th Pay Commission headed by AK Mathur had earlier proposed the rate of House Rent Allowance (HRA) at 24 percent, 16 percent and 8 percent of the Basic Pay for Class X, Y and Z cities respectively.

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

The existing rates of HRA for Class X, Y and Z cities and towns are 30 percent, 20 percent and 10 percent of Basic pay (pay in the pay band plus grade pay).

Option 1

If the government accepts the bare recommendations of A K Mathur-led 7th Pay Commission then the HRA component of central government employees will increase ranging between 106 percent and 122 percent.

Take, for instance, a central government employee at the very bottom of the pay scale under 6th Pay Commission was till now entitled to an HRA of Rs 2,100 on basic pay of Rs 7,000 (basic pay that includes pay of pay band + grade pay) in a Class X city. It is to be noted that government, while implementing the 7th Pay Commission in June last year had made it clear that till the final outcome of allowances committee is being placed, the employees would be getting the allowances as per 6th Pay Commission.

Now, as per 7th Pay Commission, the new entry level pay at this level is Rs 18,000 per month against which the new HRA for a Class X city would be Rs 4,320 per month, that is 106 percent more than the existing level.

Similarly, at the highest level of the pay scale, the Cabinet Secretary and officers of the same rank have a basic pay of Rs 90,000, which means they are entitled to current HRA of Rs 27,000 in Class X towns. After the revised pay scale, the new basic pay is Rs 2.5 lakh, for which the HRA would be Rs 60,000, meaning a hike of 122 percent.

Option 2

If the government retains the exiting HRA rates (as per 6th Pay Commission) then the HRA component of central government employees will increase ranging between 157 percent and 178 percent.

Take, for instance, a central government employee at the very bottom of the pay scale under 6th Pay Commission was till now entitled to an HRA of Rs 2,100 on basic pay of Rs 7,000 (basic pay that includes pay of pay band + grade pay) in a Class X city. It is to be noted that government, while implementing the 7th Pay Commission in June last year had made it clear that till the final outcome of allowances committee is being placed, the employees would be getting the allowances as per 6th Pay Commission.

Now, as per 7th Pay Commission, the new entry level pay at this level is Rs 18,000 per month against which the new HRA for a Class X city would be Rs 5,400 per month, that is around 157 percent more than the existing level.

Similarly, at the highest level of the pay scale, the Cabinet Secretary and officers of the same rank have a basic pay of Rs 90,000, which means they are entitled to current HRA of Rs 27,000 in Class X towns. After the revised pay scale, the new basic pay is Rs 2.5 lakh, for which the HRA would be Rs 75,000, meaning a hike of around 178 percent.

Option 3

The government may fix HRA rates between recommendations of AK Mathur panel and 6th CPC/existing, most likely at 27 percent.