- Central Government employees await 8th Pay Commission announcement and fitment factor decision
- Current House Rent Allowance rates are 27% for X, 18% for Y, and 9% for Z Class cities
- Dearness Allowance raised to 28% from July 1, 2021, triggering HRA rate revision
As Diwali nears, government employees across the country eagerly await news about the 8th Pay Commission. Reports indicate that a declaration may be made soon, yet uncertainty continues over the fitment factor: whether it will be set at 2.86, 1.92, or somewhere between these figures. Many employees are left wondering how to calculate their expected salary and pension increases.
The House Rent Allowance (HRA) forms an essential part of the salary package for Central Government employees in India. It is designed to help cover the costs of renting a home. The allowance is calculated as a percentage of the employee's basic pay and differs depending on the classification of the city in which they reside, with higher rates applicable in metropolitan areas compared to smaller towns.
On July 14, 2021, the Cabinet Committee led by Prime Minister Narendra Modi approved an increase in Dearness Allowance (DA) to 28%, effective July 1, 2021. Following this revision, the Finance Ministry adjusted the House Rent Allowance (HRA) rates in accordance with a prior order dated July 7, 2017.
The current House Rent Allowance (HRA) rates for Central Government employees are set at 27% of basic pay for X Class, or metropolitan, cities. For Y Class cities, which are smaller urban centres, the rate is 18%, while Z Class cities, typically small towns, receive 9% of basic pay as HRA. These classifications and rates are aligned to reflect variations in living costs across different locations in India.
This update was triggered as the Dearness Allowance (DA) surpassed the 25% mark. Under the 7th Pay Commission, the HRA rates stood at 24% for X Class cities, 16% for Y Class, and 8% for Z Class towns, reflecting lower percentages than the subsequent revision.
8th Pay Commission Calculator: Updated HRA Projections Using A 2.86x Fitment Factor
The fitment factor is a multiplier used to revise the current basic pay, determining the new basic salary under the 8th Pay Commission. For example, a fitment factor of 2.86 implies that the revised basic pay will be 2.86 times the existing basic pay. This increase in basic pay consequently affects the House Rent Allowance (HRA), as HRA is calculated as a percentage of the updated basic salary.
Here is an overview of the estimated revised House Rent Allowance (HRA) for central government employees at pay Levels 1, 2, and 3, calculated using a fitment factor of 2.86:
This HRA calculation does not include allowances such as the Siachen Allowance and Tough Location Allowance, which are additional financial benefits given to employees working in challenging and remote areas of India to compensate for the hardships they face.
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