In a pre-election bonanza for government employees, the Union Cabinet is likely to approve a 4% hike in Dearness Allowance (DA). This will lead to a substantial increase in the allowances of over 1 crore central government employees and pensioners across the country.
Before the Lok Sabha elections, there's a possibility that the Union Cabinet will greenlight a 4% DA hike. If approved, this increase could potentially raise employee allowances by as much as 50%. Last October, the Union Cabinet had already raised the allowance by 4%, bringing it to 46%, benefiting 48.67 lakh employees and 67.95 lakh pensioners. This revised allowance came into effect on July 1, 2023.
Following the latest increase, the DA is set to reach 50%. As per the guidelines outlined by the 7th Pay Commission, when the DA hits the 50% mark, there will also be a corresponding rise in the House Rent Allowance (HRA). This adjustment is poised to enhance the take-home salary package of central government employees.
According to the recommendations of the pay commission, cities are categorized into three groups for the enhancement of House Rent Allowance (HRA): X, Y, and Z. For employees residing in X category cities or towns, their HRA will see an increase to 30 percent. Correspondingly, the HRA rate for employees in category Y will be set at 20%, while those in category Z will receive 10%. Presently, employees residing in X, Y, and Z category cities or towns are receiving HRA at rates of 27%, 18%, and 9%, respectively.