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 for Class X cities from 30% to 40%.
After the 8th Pay Commission is implemented, Level 5 employees could get a much higher HRA. The allowance could go 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 an 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 central government employee has a starting basic salary of ₹29,200. At present, such an employee receives 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 to 30% 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. On a basic salary of ₹29,200, this works out to ₹8,760 per month.
What Employees Are Demanding
Employee organizations are demanding a major increase in the basic salary under the 8th Pay Commission. They want the basic pay of a Level 5 employee to increase from ₹29,200 to around ₹61,320.
They are also demanding that the HRA rate for X-category cities be increased from 30% to 40%. If the new basic salary of ₹61,320 and a 40% HRA rate are approved, the monthly HRA would increase to ₹24,528.
How Is HRA Calculated?
The government and most private companies calculate HRA based on the city where an employee lives. For this purpose, cities are generally divided into three categories.