Big update on the 8th Pay Commission: HRA up to Rs 15,800 per month!

There's another big piece of good news for central government employees under the Eighth Pay Commission. Employee unions have demanded a significant increase in HRA. This will significantly benefit Level 5 employees.

 

New update on 8th Pay Commission

Central government employees eagerly awaiting an increase in their House Rent Allowance (HRA) under the 8th Pay Commission have received significant news. Employers have proposed a new fitment factor and an increase in HRA from 30% to 40% for Class X cities. It is expected that after the implementation of the 8th Pay Commission, Level 5 employees could receive a bumper HRA (house rent allowance) of up to ₹15,768 (approximately ₹15,800) per month.

What is HRA?

HRA (House Rent Allowance) is a portion of salary that companies provide to their employees to cover their living or house rent expenses. If you live in a rented house, HRA not only reduces your out-of-pocket expenses but also provides a significant income tax deduction. If you choose the Old Tax Regime, you can claim tax exemption on your HRA under Section 10(13A) of the Income Tax Act.

How much HRA is being given in the 7th Pay Commission?

Under the Seventh Pay Commission, a Level 5 employee with a starting basic salary of Rs 29,200 currently receives HRA at the rate of 30%, amounting to Rs 8,760 per month. According to government rules, when the dearness allowance (DA) exceeds 50%, the HRA rate increases to 30% for X-category cities. Since the DA is currently above 50%, Level 5 employees receive 30% of their basic salary (Rs 29,200), or the full amount of Rs 8,760 per month, from the government solely for house rent.

Now, employee organizations are demanding that this basic pay (Rs 29,200) be increased to approximately Rs 61,320 under the new Pay Commission. They are demanding that the HRA rate be increased from 30% to 40%. If this happens, the same allowance of Rs 8,760 will increase directly to Rs 24,528.

How is HRA calculated?

The government and most private companies decide HRA by dividing cities into three categories:-

Category X (Metropolitan cities - like Delhi, Mumbai, Bengaluru): Here the cost of living is the highest; hence the highest percentage of basic salary (like 30% as per current government rules) is given as HRA.

Y Category (Tier-2 cities – like Lucknow, Jaipur, Patna) –

Here the expenditure is medium; hence, the HRA is 20% of the basic.

Z Category (Small Towns or Rural Areas) – Here the lowest HRA is given (10% of basic).