7th Pay Commission: After receiving a massive hike in Dearness Allowance (DA) last year, Central government employees are in for a treat.
The central government has decided to increase their House Rent Allowance (HRA) as well.
To brief a little, House Rent Allowance is provided by your employer as a stipend for your rented apartment.
Well in order to be excluded from HRA tax deductions, you must live in rental housing.
Someone who owns a home and receives HRA from their employer is not eligible to claim tax deductions under Section 80GG.
Even if your employer does not pay you HRA or if you are self-employed, you can claim this income tax deduction.
As per the reports, overall DA will soon be increased by 34 per cent which will allow the HRA to increase as well.
Currently, the DA is at 31 per cent after considering last year’s hike.
As of now, the Central government employees are paid dearness allowance at the rate of 31%.
Besides the DA Hike, the government has also increased several other allowances in the recent past.
Currently, the government pays HRA at 27%, 18% and 9% rates depending on the category of the city where the worker is employed.
For the unversed, the government increases the HRA when the dearness allowance is increased to a certain limit. For instance, when the DA increased more than 25 per cent to 28 per cent, the government increased the HRA.
But since the government increased the dearness allowance to 31%, the subsequent HRA hike is yet to place. Central government employees are now expecting to hear an update from the government related to the same.
HRA could increase by 3%
The house rent allowance of Central government employees is likely to increase by 3% in the 7th Pay Commission. With the expected hike, the HRA will be paid to employees, currently receiving HRA at 27%, at 30 per cent. However, that will only happen if the DA crosses 50%.