Government Increases Allowances by 25% Following DA Hike

The government has increased the Dearness Allowance (DA) for central employees and Dearness Relief (DR) for pensioners by 4% to 50%, starting January 1, 2024. With this increase, specific allowances are automatically raised by 25% over current rates. The Employees’ Provident Fund Organisation (EPFO) issued a notice highlighting past orders from the Department of Expenditure/DoPT, stating that due to the DA increase, specific allowances should now be paid at the higher rate of 25% over existing rates, effective from January 1, 2024.

Allowances that have been raised by 25%

Tough Location Allowance: Certain geographical-based allowances, such as the Special Compensatory (Remote Locality) Allowance (SCRLA), Sunderban Allowance, and Tribal Area Allowance, are now combined into the Tough Location Allowance (TLA). Regions eligible for TLA are categorised into 3 groups, with rates determined by the various cells of the R&H Matrix, ranging from ₹1,000 to ₹5,300 per month.

Conveyance Allowance: In mid-2017, the Ministry of Finance issued a revised list of allowances and grants for Central Government employees based on the 7th Pay Commission (7 CPC). Despite some ongoing issues with the 7 CPC, particularly for the Armed Forces, the House Rent Allowance (HRA) and travel allowance levels for all Central employees were adjusted. However, many states still pay their employees under the 6th Pay Commission provisions, causing differences in conveyance allowance provisions between Central and State cadres.

Special Allowance for Children of Women with Disabilities: Following the 7th Central Pay Commission’s recommendations, the special allowance for women with disabilities for child care increased from₹1,500 to ₹3,000 per month. This allowance is given from the child’s birth until the child turns two years old and applies to a maximum of the two eldest surviving children. It will automatically increase by 25% whenever the Dearness Allowance on the revised pay structure rises by 50%. This change has been effective since July 1, 2017, and applies to all central government disabled women employees, regardless of their posting location.

Children’s Education Allowance: Government employees will now receive a fixed reimbursement of ₹2,812.5 per month for children’s education allowance and ₹8,437.5 per month for hostel subsidy, regardless of actual expenses. For children with disabilities of government employees, the allowance is doubled to ₹5,625 per month. Additionally, women with disabilities will receive a revised special allowance of ₹3,750 per month under specified conditions. These changes are effective from January 1, 2024, following a 4% increase in Dearness Allowance (DA).

House Rent Allowance (HRA): House Rent Allowance (HRA) rates vary based on the city of residence, categorised as X, Y, and Z. Category Z cities will see the smallest increase. As per the 7th Pay Commission, HRA rates are set to be adjusted to 30%, 20%, and 10%, respectively, for these categories. According to a Ministry of Finance memorandum quoted by the Economic Times, additional notifications may not be needed to implement these revisions, simplifying the process.

Allowances That Has Been Revised

Following the increase in Dearness Allowance (DA) to 50% of basic pay, several allowances have been raised by 25% over their current rates. These include Hotel Accommodation, Reimbursement of Traveling Charges for city travel (station touring), Reimbursement of Food Charges or Lump Sum Amounts or Daily Allowance, allowances for journeys using personal vehicles like cars, taxis, auto rickshaws, or scooters without specified rates from the State Transport Director, Transportation of personal effects by road during transfers, Dress Allowance, Split Duty Allowance, and Deputation (Duty) Allowance.

Impact on Salary and Pension

These allowances are linked to the employee’s pay band, level, or grade, affecting their overall salary and pension. The impact will vary based on an individual’s current salary structure and existing allowances.

“As per the 7th Pay Commission recommendations, the pay matrix should automatically be revised once the DA crosses 50%. That can be done even before the 8th Pay Commission news is announced,” said Shiv Gopal Mishra, National Secretary (Staff Side) of Joint Consultative Machinery – a recognised body of central government employees.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.