8th pay commission: Rent increase, no hike since 2017 — Here's why the NC-JCM is demanding HRA revision

The 8th pay commission is in the discussion phase before it releases its official recommendations on pay hikes, allowances, salary structure, and more. Constituted once a decade, this time, close to 1 crore beneficiaries — nearly 50 lakh central government employees and around to 65 lakh pensioners, including defence personnel and retirees — are set to benefit from the announcement.

These meetings are significant as suggestions made by these groups are expected to play an important role in shaping the commission's deliberations concerning remuneration and pension structures for the central government workforce. These groups collectively represent a large number of employees and pensioners, including defence and railway staff.

Chaired by former Supreme Court Justice Ranjana Prakash
Desai, the commission includes Pankaj Jain, a former IAS, as Member-Secretary, and Professor Pulak Ghosh, tenured Professor of Finance, Member of the Economic Advisory Council to the Prime Minister, as a Member of the Commission. The 8th CPC's official Terms of Reference (ToR) were released late last year.

Notably, a key demand made by employee representatives this year, is with regards to revision for house rent allowance (HRA) in salary. According to the National Council – Joint Consultative Machinery (NC-JCM), while rent price has kept climbing, HRA rates have remained unchanged since 2017. It has thus proposed revision for the allowance by this CPC.

Why is the NC-JCM's demanding HRA revision?

The NC-JCM is one of the three major employee groups is seeking substantial pay and allowance overhaul for central government employees and pensioners. Some of its key demands include hiking minimum basic pay to ₹69,000, simplified salary architecture, hiking annual increment to 6% from current 3%, and merger of employee levels to create unified pay scales.

For HRA, the group in its memorandum to the commission, noted that rent costs in most towns and cities in India are far higher compared to the sanctioned allowance for level 1 employees under the provision specified in the 6th CPC. Further, rates have remained unchanged since 2017, since the 7th CPC had no revisions for HRA.

Thus, as per calculations, level 1 employee is entitled to ₹4,860 per month as HRA (at basic pay of ₹18,000 and HRA rate of 27%). However, rent has increased 80-120% in cities such as Bengaluru and Delhi making rent expensive. Further, at present, pensioners do not receive HRA.

Thus, the NC-JCM’s has proposed that HRA be revised for employees and pensioners also be included for the allowance in the 8th CPC. Here's a look at the NC-JCM's proposed rate revision:

House Rent Allowance: Rate, current rules

HRA is a component of your salary structure that aims to help employees with rent-related expenses. This is especially provided in big cities, where the rental expense is usually high. At present, taxpayers in big metros, including Chennai, Delhi, Kolkata and Mumbai, are eligible for a 50% HRA exemption, while taxpayers in other urban centres can claim a 40% exemption.

Earlier this year, the Centre expanded its list of metro cities for HRA purposes. In addition to Delhi, Mumbai, Kolkata, and Chennai, Bengaluru, Hyderabad, Pune, and Ahmedabad are now treated as metro cities. This means that house renters in these cities can claim 50% HRA exemption.

Notably, one can claim both HRA and home loan exemption together under certain conditions but cannot claim HRA without proof of rent payments. It also has a tax benefit under Section 10(13A) of the old tax regime, under which a salaried individual can claim HRA as a partial tax exemption for rent paid during the financial year. The same is not available under the new tax regime.

What are other demands for HRA revision?

Earlier this month, the All India NPS Employees Federation (AINPSEF) also demanded that HRA be revised upwards under the 8th CPC. It recommended 36% HRA for X category cities, 24% for Y category cities and 12% for Z category cities. Further, another suggestion is that HRA be increased every time DA is hiked.

Further, a teachers' body, the Pragatisheel Shikshak Nyaya Manch (PSNM), a body representing central government teachers (UTs, Kendriya Vidhyalaya and Navodaya Vidyalaya) and affiliated with AINPSEF, in April also demanded that HRA be hiked up to 36% and fitment factor be increased in the range of 2.62 to 3.83 by the 8th CPC.

When are final recommendations expected?

As per the plan, the CPC is expected to submit its final recommendations around 18 months after its constitution on 3 November 2025. This means that the earlier we can get the panel's submissions, the better. February or April 2027 is the earliest we can get them.

Further, based on past trends, once the pay commission's recommendations are made, the rollout takes another two to three years to complete. This means that hikes announced in 2027 may only be fully implemented by 2029 or 2030.