7th Pay Commission: Central government employees to get HRA increase with DA hike to 50%; details and calculations here

7th Pay Commission Dearness Allowance hike: Central government employees’ dearness allowance (DA) has been raised to 50%, effective from January 1, 2024. When DA hits 50%, allowances like House Rent Allowance (HRA) are adjusted. Employees are now waiting for other allowances to be updated.

The Department of Personnel and Training has listed allowances to be revised after the DA increase this month. But there’s no order yet for HRA changes. Will the government issue a separate order for HRA hike as DA reaches 50%? How much will the HRA increase be? When can employees expect it? Here’s what you need to know about the expected HRA increase and its implications:

HRA increase

ET quoted Sanjeev Kumar, Partner at Luthra and Luthra Law Offices India, as saying, “To understand the change in House Rent Allowance, we need to understand its calculation with its components which is paid to the central government employees. The HRA depends upon the type of city in which the employee resides.”

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Projected HRA

HRA calculations categorise cities into types X, Y, and Z based on Census data and other factors. As per the 7th Pay Commission’s recommendations, HRA was adjusted to 24%, 16%, and 8% of the basic pay for X, Y, and Z cities, respectively, starting from July 1, 2017.

Subsequently, when the DA reached 25%, the HRA rates were adjusted to 27%, 18%, and 9% of the basic pay in X, Y, and Z cities, respectively.

Hence, for a central government employee with a base pay of Rs 35,000, the HRA would be as follows, as explained by Rohit Jain, Managing Partner at Singhania & Co.:

a) For type X city: 27% of Rs 35,000 = Rs 9,450

b) For type Y city: 18% of Rs 35,000 = Rs 6,300

c) For type Z city: 9% of Rs 35,000 = Rs 3,150

So, previously, the HRA for type X city was Rs 9,450, for type Y city was Rs 6,300, and for type Z city was Rs 3,150.

Now, with the DA reaching 50%, the recommended HRA rates are 30% for type X city, 20% for type Y city, and 10% for type Z city.

So, for a base pay of Rs 35,000, the revised HRA amounts would be:

a) Type X city: Rs 10,500

b) Type Y city: Rs 7,000

c) Type Z city: Rs 3,500

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Implementation of HRA revision

The question now is whether the Centre will issue a separate order to revise HRA for central government employees. Kumar explains that according to a Ministry of Finance memo dated July 7, 2017, clear instructions exist for HRA adjustments when DA surpasses 50%, suggesting that another notification might not be needed.

A similar query arose when DA hit 25%, as clarified by the Department of Expenditure, Ministry of Finance in a notification dated August 4, 2021. Venkatesh from SKV Law Offices confirms that no separate order is required to increase HRA at 25% and 50% DA levels.

Manmeet Kaur of Karanjawala & Co echoes this, stating that based on the last notification, a separate notification for HRA revision may not be released by the government.

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