Central government employees waiting for a higher House Rent Allowance (HRA) under the 8th Pay Commission have received important news.
Employee organizations have proposed a new fitment factor and an increase in HRA from 30% to 40% for Class X cities.
After the 8th Pay Commission is implemented, Level 5 employees could get HRA of up to ₹15,768, or around ₹15,800, per month.
What Is HRA?
HRA, or House Rent Allowance, is a part of an employee’s salary given to help cover house rent and living expenses. For employees living in rented houses, HRA can reduce their monthly expenses.
It can also provide tax benefits. Employees who choose the Old Tax Regime can claim HRA tax exemption under Section 10(13A) of the Income Tax Act.
HRA Under the 7th Pay Commission
Under the 7th Pay Commission, a Level 5 employee has a starting basic salary of ₹29,200. At present, such employees receive HRA at the rate of 30%, which comes to ₹8,760 per month.
As per government rules, the HRA rate for X-category cities increases when the Dearness Allowance (DA) crosses 50%. Since the DA is currently above 50%, Level 5 employees are receiving 30% of their basic salary as HRA.
Therefore, on a basic salary of ₹29,200, the HRA comes to ₹8,760 per month.
Proposed HRA Under the 8th Pay Commission
Employee organizations are demanding a major increase in basic pay under the new Pay Commission. They want the basic salary of ₹29,200 to increase to around ₹61,320.
They are also demanding that the HRA rate for X-category cities be increased from 30% to 40%. If the proposed basic salary and HRA rate are approved, the HRA could rise significantly.
At a basic salary of ₹61,320, 40% HRA would be ₹24,528 per month.
How Is HRA Calculated?
The government and most private companies generally divide cities into three categories to calculate HRA:
