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At present, in the case of those drawing either NPA or MSP or both, HRA is being paid as a percentage of BP+NPA or BP+MSP or BP+NPA+MSP respectively.
The report of the Committee on the 7th Pay Commission allowances has been submitted. Under the existing provisions HRA is paid at 30, 20 and 10 percent for X class (50 Lakh & above), Y class (5 to 50 lakh) and Z class (below 5 lakh) cities respectively.
At present, in the case of those drawing either NPA or MSP or both, HRA is being paid as a percentage of BP+NPA or BP+MSP or BP+NPA+MSP respectively. The pay panel recommendations stated that it has been retained and rationalized. After applying a multiplication factor of 0.8, the rates have been revised downwards to 24 percent, 16 percent and 8 percent of the Basic Pay for X, Y and Z class cities, respectively. 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. Add-ons like NPA, MSP, etc. should not be included while working out HRA.
Analysis and Recommendations of the Committee
HRA rates have been revised downwards by applying the multiplication factor of 0.8 applied by the commission on all percentage- based allowances. This was done to neutralise the significant increase in the Basic Pay. All fixed allowances have only been given an inflation indexed increase by the 7th CPC. While the commission has not explicitly stated how the multiplication factor of 0.8 has been arrived at anywhere in the Report, it may be seen that factoring in the expected Dearness Allowance of 125% on 01.01. 2016 would have yielded a multiplication factor of 0.875 which may have been rounded off to 0.8.
On the recommendation that the rate of HRA will be revised to 27%, 18% and 9% when DA crosses 50 percent and further revised to 30%, 20% & 10% when DA crosses 100%, the Committee is of the view that given the inflation rates since January 2016 and the RBI policy on inflation, the DA rates might not go beyond 50% in the next 10 years.
While the rents for residential accommodation have not gone up significantly in the recent past and might also have fallen in some areas, the HRA at the rates recommended by the commission at the lower levels might not continue to be adequate as per the prevailing market rent.
Option
Having
regard
to
submissions
made
before
it
stating
that
towards
the
later
part
of
the
ten
year
period,
HRA
compensation
falls
considerably
short
of
requirement,
the
commission
has
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.
However,
considering
the
present
inflation
rate,
the
rate
of
increase
of
the
Dearness
Allowance
and
future
inflation
projections,
it
appears
unlikely
that
DA
rates
will
reach
100
%
in
the
ten
year
period.
Taking
this
into
consideration,
the
Committee
considered
that
the
timing
of
the
upward
revisions
in
HRA
rates
proposed
by
the
7th
CPC
may
be
advanced
as
under:
This
would
have
no
immediate
financial
implication
and
the
1st
revision,
as
per
the
current
trend
of
increase
in
DA,
is
expected
to
occur
in
July,
2018.
Accordingly,
additional
annual
financial
implication
in
July,
2018
will
be
approximately
₹1850
crore.
The
additional
financial
implication
in
the
second,
third
and
fourth
revision
will
also
be
approximately
₹1850
crore
per
annum.
Instead of advancing the full restoration of HRA rates, the Committee considered splitting the revisions proposed by commission as under:
The financial implication would be similar as in Option (i) except that the timing of the revision would undergo a change.
It has been pointed out that at the recommended rates, HRA at the minimum level might not be sufficient. The minimum HRA calculated at the entry level of Level 1for X, Y and Z category cities at the rates recommended by the 7th CPC will be ₹4320, ₹2880 and ₹1440 respectively. The Committee considered recommending that the HRA at the rates recommended by the commission may be subject to a floor which may be fixed at ₹5400, ₹3600 and ₹1800 per month, calculated at 30%, 20% and 10% of the minimum pay for X, Y and Z category cities respectively. This will benefit employees in Levels 1, 2 and 3.
The additional financial implication is estimated to be ₹ 385.00 crore and around 7.70 lakh employees shall be benefited. After a detailed consideration of the above options, the Committee recommended that either only option (iii) or option (iii) in combination with option (ii) be accepted. A final decision in this regard may be taken by E-CoS.
Transport allowance
Existing Provisions: Granted to cover the expenditure involved in commuting between place of residence and place of duty. Officers drawing GP 10000 and higher, who are entitled to the use of official car, have the option to avail of the existing facility or to draw TPTA @ ₹7000 + DA. Differently abled employees are granted TPTA at double rates subject to a minimum of ₹1000+DA.
Officers in Pay Level 14 and higher, who are entitled to the use of official car, will have the option to avail themselves of the existing facility or to draw the TPTA at the rate of ₹15,750+DA pm. Differently abled employees will continue to be paid at double rate, subject to a minimum of ₹2,250 plus DA.
ii. Income Tax exemption, which was available for Transport Allowance, may be reintroduced. Ministry of Health and Family Welfare: SAG Doctors should be paid Transport Allowance at the rates admissible to Joint Secretary in lieu of Staff Car.
Analysis and Recommendations of the Committee of 7th Pay Commission
The Committee notes that the Transport Allowance is fully indexed to Dearness Allowance and the rates have accordingly been revised by the 7th Pay Commission. As the demands do not relate to any changes recommended by the commission, the recommendations of the 7th CPC on Transport Allowance may be accepted without any change. When this allowance was introduced by 5th Pay Commission, the entire amount was exempted from Income Tax. However, the Committee is not making any recommendations relating to raising of Income Tax ceiling on Transport Allowance as it is not within the purview of the Committee. The matter may be taken up separately with Department of Revenue.
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