7th Pay Commission: Allowances are fine but what about arrears on HRA, DA?

The government has cleared the air over 7th Pay Commission recommendations and said that nearly 50 lakh employees will get their House Rent Allowance (HRA), Dearness Allowance (DA) and others beginning July 2017. However, what happens to arrears on these allowances as the 7th Pay Commission came into force from January 1, 2016. 

Interestingly, the notification that the government published in the Gazette of India to make the 7th Pay Commission official does not talk about arrears on allowances like HRA and DA. 

The notification in the Gazette of India was published on July 6, 2017 where the government said that 7th Pay Commission recommendations were accepted with 34 modifications. 

ALSO READ: Full list of all 34 revisions and HRA decision taken by Cabinet

The government said that accepting the modifications to the 7th Pay Commission would add to its financial burden slightly. It said, "The modifications approved by the Government in the recommendations of the 7th CPCon allowances will lead to a modest increase of Rs 1,448.23 crore per annum over the projections made by the 7th CPC. The 7th CPC, in its Report, had projected the additional financial implication on allowances at Rs 29,300 crore per annum." 

The combined additional financial implication on account of the 7th CPC recommendations along with the modifications approved by the Cabinet is estimated at Rs 30,748.23 crore per annum, it said. 

House Rent Allowance

HRA is currently paid @ 30% for X (population of 50 lakh & above), 20% for Y (5 to 50 lakh) and 10% for Z (below 5 lakh) category of cities. 7th CPC has recommended reduction in the existing rates to 24% for X, 16% for Y and 8% for Z 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 that HRA shall not be less than ₹5400, ₹3600 and ₹1800 for X, Y and Z category of cities respectively. This floor rate has been calculated @ 30%, 20% and 10% of the minimum pay of ₹18000. This will benefit more than 7.5 lakh employees belonging to Levels 1 to 3.

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%. 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.

Arrears

The 7th Pay Commission recommendations for basic pay were accepted in mid-2016 with the government stating that the revised pay will be given from January 1, 2016 -- i.e. arrears. 

However, the government has not notified any arrears for allowances. This means that HRA and DA will be paid from July 1, 2017 and not from January 1, 2016. 

Simply put, employees expecting fat arrears on accumulated HRA and DA are in for a rude shock.