7th Pay Commission latest news: Huge relief for central government employees; FM Sitharaman reduces House Building Advance interest rate

7th Pay Commission latest news: While announcing various relief measures last Saturday, Finance Minister Nirmala Sitharaman announced a relief measure that will directly benefit central government employees. The Union Finance Minister announced to reduce the House Building Advance interest rate on HBA interest rate from existing 8.5 per cent to 6.64 per cent. The Narendra Modi led central government had earlier revised the House Building Advance rules for Central Government Employees incorporating the accepted recommendations of the 7th Central Pay Commission or 7th CPC.

FM Nirmala Sitharaman announced that the HBA interest rate will be linked to the 10-year G-Sec yield on the amount of advance taken for building home. Currently, the rate of interest on Housing Building Advance is at 8.50 per cent of simple interest. As on September 14, 2019, the 10-year G-Sec yield stands at 6.64 per cent. This means the interest rate under HBA will fall from existing 8.5 per cent to around 6.64 per cent for the Central government employees. However, actual modalities on effective HBA interest rate are yet to be seen.

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House Building Advance rules on maximum claim

The total amount that a central government employee can avail of under House Building Advance is up to his or her 34 month basic monthly salary or Rs 25 lakh or cost of the house or the amount as per the repaying ability of the employee, whichever is lower for new construction or purchase of new house or flat.

A central government employee to claim HBA for house expansion too. But, the HBA for house expansion is capped at Rs 10 lakh or 34 month basic monthly salary, or amount as per the repaying ability of the employee, whichever is lower.

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The methodology of recovery of HBA shall continue as per the existing pattern recovery of principal first in the first fifteen years in 180 monthly instalments and interest thereafter in next five years in 60 monthly instalments.

If both spouses are central government employees, then both are eligible to claim HBA either separately or jointly.