7th Pay Commission: Many employees are curious about possible changes to House Rent Allowance (HRA) and other allowances especially in light of the Central Government‘s recent announcement to a 50% rise in Dearness Allowance (DA). This is a summary of the changes and how they affect employees in various city categories.
How DA Increase Affects HRA
Employees of central government are directly impacted by increases in DA, and their HRA is adjusted according to the category of the city in which they live. Based on a set of criteria cities are assigned an A, B, or C classification, and the corresponding HRA rates vary.
Calculation Before DA Increase
Previously, HRA rates were set at 24%, 16%, and 8% of the basic salary for Category A, B, and C cities respectively. For instance, if an employee’s basic pay is Rs 35,000, their HRA would be:
- Category A: 27% of Rs 35,000 = Rs 9,450
- Category B: 18% of Rs 35,000 = Rs 6,300
- Category C: 9% of Rs 35,000 = Rs 3,150
New HRA Rates with 50% DA Increase
With the recommendation of the Seventh Pay Commission, when DA reaches 50%, the HRA rates are proposed to be increased to 30%, 20%, and 10% for A, B, and C category cities respectively.
Revised Calculation
With the revised rates, the HRA for an employee earning Rs 35,000 as base salary will be:
- Category A: 30% of Rs 35,000 = Rs 10,500
- Category B: 20% of Rs 35,000 = Rs 7,000
- Category C: 10% of Rs 35,000 = Rs 3,500
Impact of Revised HRA
Employee HRA increases as a result of the change for all city categories. As an example:
- The yearly HRA for workers in Category A cities would increase from Rs 9,450 to Rs 10,500.
- The yearly amount for residents in Category B cities would rise from Rs 6,300 to Rs 7,000.
- The yearly salary for workers in Category C cities would increase from Rs 3,150 to Rs 3,500.
