The recommendations of the 7th Pay Commission came into effect after the Union Cabinet cleared it last week. Central government employees who were waiting for good news were however disappointed with the HRA structure.
Finance Minister Arun Jaitley said the modifications are based on suggestions made by the CoA in its report submitted to the Finance Minister on April 27, and the Empowered Committee of Secretaries set up to screen the recommendations of the 7th Pay Commission.
What HRA will you get
HRA is currently paid at 30% for X (population of 50 lakh & above), 20% for Y (5 to 50 lakh) and 10% for Z (below 5 lakh) category of cities. The pay commission has recommended reduction in the existing rates to 24% for X, 16% for Y and 8% for Z category of cities.
As the HRA at the reduced rates may not be sufficient for employees falling in lower pay bracket, it has been decided that HRA shall not be less than ₹5400, ₹3600 and ₹1800 for X, Y and Z category of cities respectively
This floor rate has been calculated at 30%, 20% and 10% of the minimum pay of ₹18000; this will benefit more than 7.5 lakh employees belonging to Levels 1 to 3. The pay commission had also recommended that HRA rates will be revised upwards in two phases to 27%, 18% and 9% when DA crosses 50% and to 30%, 20% and 10% when DA crosses 100%.
Keeping in view the current inflation trends, the government has decided that these rates will be revised upwards when DA crosses 25% and 50% respectively. This will benefit all employees who do not reside in government accommodation and get HRA.
Allowances comes into effect
Meanwhile the revised allowances came into effect from July 1. The allowances as recommended by the 7th Pay Commission would have cost the exchequer Rs 29,300 crore. The modified allowances approved by the Union Cabinet headed by Prime Minister Narendra Modi will increase the burden by Rs 1,448 crore to Rs 30,748 crore per annum. The 7th Pay Commission suggested abolition of 53 allowances. Of these, the government decided not to do away with 12 allowance.