Govt approves 7th pay panel recommendations, effective from July 1

Benefiting about 47 lakh of Central government employees and defence personnel, the Centre Wednesday approved the 7TH Pay Commission recommendation for an increase in their allowances including that of house rent. The move will cost the exchequer Rs 30,748.23 crore in the fiscal 2017-18.

The increased allowance will be effective from Friday (July 1). 

The Union Cabinet chaired by Prime Minister Narendra Modi approved the decision.

Consequently, the HRA will be paid at the rate of 24%, 16% and 8% of the new basic pay that was approved from January 1 last year.

“HRA shall not be less than Rs 5,400, Rs 3,600 and Rs 1,800 for X, Y and Z category of cities respectively. This floor rate has been calculated at the rate of 30%, 20% and 10% of the minimum pay of Rs 1,8000. This will benefit more than 7.5 lakh employees belonging to Levels 1 to 3,” Finance Minister Arun Jaitley said briefing reporters after the Cabinet meeting.

HRA is currently paid at 30% for X (population of 50 lakh & above), 20% for Y (5lakh to 50 lakh) and 10% for Z (below 5 lakh) 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 to raise it, the minister said.

The 7th CPC 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%.

But 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, Jaitley said.

The Government has also decided to double Siachen allowance which will now go up from the existing rate of Rs 14,000 to Rs 30,000 per month for Jawans & JCOs (Level 8 and below) and from Rs 21,000 to Rs 42,500 per month for officers (Level 9 and above).

Besides, the children education allowance has been increased from Rs 1,500 per month / child to Rs 2,250 per month / child with a maximum limit of two children. Hostel subsidy will also go up from Rs 4,500 per month to Rs 6,750 per month.

The existing rates of special allowance for child care for women with disabilities has been doubled from Rs 1,500 per month to Rs 3,000 per month.

Higher qualification incentive has been increased from Rs2000 - Rs10000 to Rs10,000 – Rs30,000.

Jaitley said the government approved recommendations of 7th CPC on allowances with 34 modifications.

The move is expected to spur consumer demand which was hit by the November 8 demonetisation decision.