Allowances for central government employees

Allowances are the amounts a central government employee receives over and above basic pay , to meet the cost of living, the conditions of duty, and specific job-related expenses. They are governed by the recommendations of the 7th Central Pay Commission , given effect through the Ministry of Finance, Department of Expenditure Resolution No. 11-1/2016-IC dated 6 July 2017, and are reviewed afresh by each Central Pay Commission. About 100 allowances survived the 7th CPC rationalisation, and the largest by reach are dearness allowance , house rent allowance and transport allowance , which together can add 40 to 90 per cent on top of basic pay.

This is the hub for the allowance cluster on salary-calculator.in. It sets out what allowances are, the sweeping 7th CPC reform that reshaped them, a taxonomy of the major allowances, the three ways they are revised (the single most useful thing to understand about them), how they are taxed, and the dearness relief that is their equivalent for pensioners. Each allowance with its own article is summarised here in a few sentences and linked; the detail lives in the child page.

The 7th CPC allowance reform

The allowances an employee draws today are the product of a large rationalisation. The 7th Central Pay Commission, whose report was submitted on 19 November 2015, devoted the whole of Chapter 8 to allowances. It examined 196 allowances, and recommended abolishing 51 of them and subsuming 37 into larger or newly created allowances, which left roughly 100 in force. The Commission applied a three-part test to each: whether it should continue at all, whether the set of people covered was still appropriate, and whether it could be clubbed with allowances of similar purpose. (Some Department of Expenditure framings count 197, 52 and 36, because items were counted differently at different stages; the 196, 51 and 37 figures are those in the Cabinet statement.)

Because the changes were far-reaching and drew heavy representations from the staff side, the Cabinet, which had approved 7th CPC pay and pension on 29 June 2016, referred allowances to a Committee on Allowances headed by the Finance Secretary and Secretary (Expenditure), Ashok Lavasa. That committee submitted its report on 27 April 2017, the matter went to the Empowered Committee of Secretaries, and the Cabinet approved the allowances package on 28 June 2017. The government softened some of the Commission’s cuts, retaining a dozen of the allowances the Commission had wanted abolished for the functional needs of the Railways, Posts and the scientific departments, and letting a few of those recommended for subsuming keep a separate identity.

The whole package was implemented by Resolution No. 11-1/2016-IC, published in the Gazette of India (Extraordinary) on 6 July 2017, with all revised allowances effective from 1 July 2017. The additional cost to the exchequer was estimated at about Rs. 30,748 crore a year.

The major allowances

The table below is the taxonomy of the allowances that reach the most employees. The summaries that follow the classification section expand the ones with their own articles.

Beyond these, the framework carries a long tail of smaller allowances: the hard area allowance and the island special duty allowance for remote postings, the deputation (duty) allowance whose ceiling the 7th CPC raised by 2.25 times, cash-handling and treasury allowances, the dress allowance into which the Commission merged the old uniform, kit-maintenance, robe, shoe and washing allowances, and the overtime allowance, which was abolished for most categories and retained only where it is statutory or operationally essential.

How allowances are revised

The single most useful thing to understand about allowances is that the 7th CPC sorted every retained allowance into one of three revision behaviours. Knowing which bucket an allowance is in tells you how and when it changes.

The first group is percentage-based, set as a percentage of basic pay, so it rises automatically as basic pay grows through increments and pay revisions and needs no separate order. House rent allowance and non-practising allowance are of this kind.

The second group is slab-based, set as a fixed rupee amount, but carrying a built-in provision that the amount rises by 25 per cent each time dearness allowance rises by 50 per cent. This is the family that includes children education allowance, the hostel subsidy, the cells of the risk and hardship matrix, the dress allowance and many field allowances. The mechanism matters because it works without a fresh order: when dearness allowance reached 50 per cent on 1 January 2024, these slab allowances stepped up by 25 per cent automatically, and the Department of Expenditure confirmed that no separate order was needed once the threshold was crossed. Dearness allowance is now 60 per cent; the next 25 per cent step-up in these allowances comes only when it reaches 100 per cent.

The third group is fully indexed to dearness allowance already, and so was given no separate raise. Transport allowance is the headline example, because dearness allowance is paid on top of it every month.

Two further points from the 6 July 2017 framework are worth stating. Allowances not indexed to dearness allowance were raised on revision by a factor of 2.25, partially indexed ones by 1.5, and allowances paid as a percentage of pay were rationalised by a factor of 0.8. That last factor is why house rent allowance was first recast downward and then restored: the 7th CPC had recommended that house rent allowance rise when dearness allowance crossed 50 and 100 per cent, but the government eased the trigger so that it rises when dearness allowance crosses 25 and 50 per cent, taking the rates to 27, 18 and 9 per cent and then to 30, 20 and 10 per cent, with monthly floors of Rs. 5,400, Rs. 3,600 and Rs. 1,800.

The allowances in brief

• Dearness allowance is the inflation-neutralising percentage of basic pay paid to all employees, revised on 1 January and 1 July each year from the All India Consumer Price Index for Industrial Workers. It stands at 60 per cent from 1 January 2026, and it is the largest single addition to pay.
• House rent allowance is 30, 20 or 10 per cent of basic pay for an X, Y or Z class city, with floors of Rs. 5,400, Rs. 3,600 and Rs. 1,800. The city classification for HRA article lists which city falls in which class.
• Transport allowance is a fixed monthly amount by pay level and city, higher in 19 listed cities, with dearness allowance paid on top. It is the daily-commute allowance, and is not to be confused with travelling allowance.
• Travelling allowance reimburses journeys on tour and on transfer, with the travel class set by pay level, a daily allowance for the stay, and the composite transfer grant on a move of station.
• Children education allowance is Rs. 2,812.50 a month per child for up to two children, with a hostel subsidy and a double rate for a differently-abled child. It is a classic slab allowance that rose 25 per cent when dearness allowance hit 50 per cent.
• Leave Travel Concession reimburses the fare for a home-town or all-India journey by the employee and family in four-year blocks, and is a leave-linked concession rather than a duty reimbursement.
• Risk and hardship allowance is the 7th CPC’s single risk and hardship matrix, from the lowest cell to the RH-Max cell, which subsumed dozens of separate field allowances into one graded structure.
• Nursing allowance is a flat monthly allowance for nursing staff, of the slab type that rises with dearness allowance.
• Non-practising allowance is 20 per cent of basic pay for government doctors who give up private practice, counted with basic pay for some purposes.
• Running allowance is the kilometreage-based pay of railway running staff, with a fixed pay element that counts for dearness allowance, house rent allowance and pension.
• Military Service Pay is the flat element for defence personnel up to the rank of Brigadier and its equivalents, recognising the special conditions of military service.

How allowances stack up on a pay slip

The reason allowances matter so much is their sheer weight in the pay slip: at the current dearness allowance they can equal or exceed basic pay. Take an employee at Level 7, with an entry basic of Rs. 44,900, posted in a metro:

The three routine allowances alone come to about Rs. 46,000, slightly more than the basic pay itself, so the gross is roughly double the basic. This is why a change in the dearness allowance rate, or a move between city classes, shifts the take-home so noticeably: the allowances are not a small top-up but the larger half of the pay. An employee in an official residence draws no house rent allowance but has the accommodation instead, and one in a Z-class town draws far less, which is why two employees on the same basic pay can take home very different amounts. The take-home salary article builds the full slip, deductions and all.

Allowances across the pay commissions

Allowances are not fixed for all time; each Central Pay Commission revisits them. The 6th Central Pay Commission left a large and untidy set of small allowances, many of them frozen at rupee values that inflation had made trivial. The 7th CPC’s main contribution was to prune and consolidate that set, abolishing the obsolete, merging the overlapping, and building the single risk and hardship matrix in place of dozens of separate field allowances. The one constant across every commission is dearness allowance, which is not really discretionary: it tracks the price index and is revised twice a year regardless of the commission cycle, so it rises steadily between commissions and is reset to zero, folded into pay, only when a new commission’s pay is implemented. The 8th Central Pay Commission , constituted in November 2025, will review the allowances again when it reports, but no revised allowance figure for it can be stated as fact until it does.

How allowances are taxed

Allowances are, as a rule, fully taxable as salary, and the new tax regime, the default since the financial year 2023-24, removes nearly all the exemptions that once applied to them. A few survive, and only in the old regime. The house rent allowance exemption under Section 10(13A) with Rule 2A is the largest, computed as the least of the actual allowance, the rent paid over 10 per cent of salary, and 50 per cent of salary in a metro or 40 per cent elsewhere. The Leave Travel Concession fare exemption under Section 10(5) applies to two journeys in a block of four years. The children education allowance carries only a token exemption of Rs. 100 a child a month, and transport allowance is now exempt only for a differently-abled employee, at Rs. 3,200 a month. The income tax for government employees article works through the numbers; the point here is that in the new regime most allowances are simply part of taxable salary.

Dearness relief for pensioners

Dearness relief is the pension-side equivalent of dearness allowance. It adjusts a central government pension for inflation at the same rate as dearness allowance, is revised on the same half-yearly cycle, and is paid on the full basic pension and on family pension. So a pensioner’s protection against inflation moves in step with a serving employee’s, and the dearness relief article covers how it is applied.

See also

• Dearness allowance
• Dearness relief
• House rent allowance
• City classification for HRA
• Transport allowance
• Travelling allowance (TA)
• Children education allowance
• Hostel subsidy
• Leave Travel Concession
• Risk and hardship allowance
• Nursing allowance
• Non-practising allowance
• Running allowance
• Military Service Pay
• Special duty allowance
• Uniform allowance
• Dress allowance
• Deputation (duty) allowance
• Take-home salary for central government employees
• Basic pay
• Pay matrix
• 7th Central Pay Commission
• 8th Central Pay Commission
• Department of Expenditure
• Income tax for government employees
• Central government pension
• Central government employees in India
• 7th CPC salary calculator
• HRA exemption calculator
• Salary by pay level

External references

• Department of Expenditure
• Department of Expenditure: 7th CPC allowances resolution
• Department of Personnel and Training
• Department of Pension and Pensioners’ Welfare

References

1. Report of the Seventh Central Pay Commission (submitted 19 November 2015), Chapter 8 (Allowances).
2. Ministry of Finance, Department of Expenditure, Resolution No. 11-1/2016-IC, published in the Gazette of India (Extraordinary), 6 July 2017 (revised allowances effective 1 July 2017).
3. Committee on Allowances (chaired by Finance Secretary Ashok Lavasa), report submitted 27 April 2017; Cabinet approval of the allowances package, 28 June 2017.
4. Income-tax Act, 1961, Section 10(13A) and Rule 2A (house rent allowance), Section 10(14) and Rule 2BB (transport and children education allowances), and Section 10(5) and Rule 2B (Leave Travel Concession).
5. Department of Expenditure Office Memorandum on the revision of dearness-allowance-indexed allowances on the crossing of 50 per cent dearness allowance from 1 January 2024.