Dearness allowance (DA) of central government employees increased to 50%. The revised DA will be effective retrospectively, from January 1, 2024. When DA touches 50%, certain allowances such as House Rent Allowance (HRA) are also revised. Now the central government employees are eagerly waiting for the other allowances to be modified.
The Department of Personnel and Training has already released a list of allowances that will be revised following the hike in DA this month. However, there has been no order yet regarding the change in HRA. Will the central government release a separate order mentioning the hike in HRA as DA reaches 50% now? How much will the hike be in HRA now? When can central government employees expect the increased HRA? ET Wealth Online answers these questions for you.
How much will HRA increase as DA touches 50% for central government employees?
First, let’s understand how a revision in DA will impact the HRA of central government employees. Sanjeev Kumar, Partner, Luthra and Luthra Law Offices India, says, “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.”
For HRA calculation, cities are categorised as type X, Y and Z based on Census, among other factors. According to the recommendations of the 7th Pay Commission, HRA has been rationalised to 24%, 16% and 8% of the basic pay for class X, Y, and Z cities, respectively, from July 1, 2017.
Later, when DA touched 25%, rates of HRA were revised to 27%, 18% and 9% of basic pay in X, Y and Z cities.
Therefore, for a central government employee with a base pay of Rs 35,000, the HRA received would be as follows, explains Rohit Jain, Managing Partner, 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, the HRA amounts would have been Rs Rs 9,450 for type X city, Rs 6,300 for type Y city and Rs 3,150 for type Z city.
The 7th Pay Commission recommended that the rates of HRA be revised to 30%, 20%, and 10% of basic pay in X, Y, and Z cities, respectively, when DA reaches 50%.
Therefore, at a basic pay of Rs 35,000, the HRA of the central government employee will be revised, Jain adds.
a) For type X city: 30% of Rs 35,000 = Rs 10,500
b) For type Y city: 20% of Rs 35,000 = Rs 7,000
c) For type Z city: 10% of Rs 35,000 = Rs 3,500
So, the HRA amounts will be Rs 10,500 for type X city, Rs 7,000 for type Y city, and Rs 3,500 for type Z city.
HRA hike for central government employees: Will Centre release a separate order regarding HRA revision?
Now the question is whether the Centre will release a separate order mentioning this revision in HRA of the central government employees. Kumar answers, “As per the Office Memorandum of the Ministry of Finance dated July 7, 2017, there are clear instructions regarding HRA once DA crosses 50%. Hence, another notification may not be required and this notification can be implemented directly.”
A similar question was raised earlier when DA had touched 25% for the central government employees. At that time, “the Department of Expenditure, Ministry of Finance by its notification dated 04.08.2021, clarified that no separate order is deemed necessary for the increase in HRA when DA reaches the stipulated level i.e., 25% and 50% level. As such, no specific order is required to increase HRA,” says Shri Venkatesh, Managing Partner, SKV Law Offices.
Echoing the same, Manmeet Kaur, Partner, Karanjawala & Co, says, “As per the last notification issued, the government may not release a separate notification revising HRA.”
When will the increased HRA become effective for central government employees?
“The increased HRA and related allowances for central government employees are likely to come from the month’s salary when the DA reaches 50%, which is effective from January 1, 2024,” says Venkatesh.
The revised HRA should have already been paid with the hiked DA in March, say many experts. Central government employees can check their salary slips of the last month to know whether their HRA has been increased from January 1, 2024.