Department of Expenditure

The Department of Expenditure is the department of the Ministry of Finance that fixes the pay and allowances of central government employees, constitutes and implements the Central Pay Commissions, and administers the financial rules, the expenditure control and the government accounting of the Union. Every pay figure cited on this site traces to one of its Office Memoranda: dearness allowance of 60% of basic pay from 1 January 2026 under No. 1/1(i)/2026-E.II(B) dated 22 April 2026, house rent allowance of 30%, 20% and 10% under No. 2/5/2017-E.II(B) dated 7 July 2017, transport allowance under No. 21/5/2017-E.II(B) of the same date.

Its authority over pay is not written into its own charter. The 12 operative entries allotted to the department in the Second Schedule to the Government of India (Allocation of Business) Rules, 1961, cover financial rules, financial sanction, staffing review, cost accounts, the Indian Audit and Accounts Department, the Controller General of Accounts, central assistance to states, state finances, plan formulation, scrutiny of legislation, scheme appraisal and public sector capital restructuring. Not one of them names pay, allowances or the Pay Commission. The department holds those subjects because entry 23(a) allotted to the Department of Personnel and Training carves six of them out of that department and hands them to the Ministry of Finance, and because entries 1 and 2 give this department the financial rules and the residual power of financial sanction.

That indirect footing explains a good deal about how pay is decided. A pay revision reaches an employee as an Office Memorandum of a finance department exercising a sanctioning power, not as a rule made by the department that owns the service conditions, which is why the pay matrix arrived through the Central Civil Services (Revised Pay) Rules notified by the Ministry of Finance rather than through an amendment to the Fundamental Rules.

This article sets out the statutory basis of the department, its place in the Ministry of Finance and who heads it, the branch codes that identify its orders, the pay and allowance Office Memoranda in force, its role in the pay commissions, the Pay Research Unit and what it publishes, the General Financial Rules and the Delegation of Financial Powers Rules, expenditure control through the Expenditure Finance Committee and the Public Investment Board, the Controller General of Accounts and the route by which a pension reaches a bank, the Staff Inspection Unit and the Chief Adviser (Cost), and the boundary that separates pay from service conditions and from pension policy.

Statutory basis: the entries in the Second Schedule

The Department of Expenditure holds 12 operative subject entries in the Second Schedule to the Government of India (Allocation of Business) Rules, 1961, made by the President under Article 77(3) of the Constitution by order dated 14 January 1961. A thirteenth entry was inserted by amendment series no. 304 dated 9 October 2013 and omitted again by amendment series no. 318 dated 12 September 2015.

The entries are, in summary: financial rules and regulations and delegation of financial powers (entry 1); financial sanction relating to all Ministries and offices of the Government of India not covered by powers delegated or conferred by the rules or by any general or special orders (entry 2); review of the staffing of government establishments with a view to securing economy (entry 3); advice to Ministries and government undertakings on cost accounts matters (entry 4); the Indian Audit and Accounts Department (entry 5); matters relating to the Controller General of Accounts, in nine sub-clauses (entry 6); release of central assistance to states, including grants recommended by the successive Finance Commissions (entry 7); analysis of the states’ finances and fiscal reforms programmes (entry 8); participation in the formulation of the plan of central Ministries and public sector undertakings (entry 9); scrutiny of central and state legislation having financial and economic implications (entry 10); appraisal and approval of investment and expenditure proposals, and the Expenditure Finance Committee and Public Investment Board procedures (entry 11); and appraisal of capital restructuring and revival proposals of central public sector undertakings (entry 12).

Pay appears nowhere in that list. The department’s jurisdiction over the pay of some 30.62 lakh civilian employees rests on the two general entries at the head of it, entry 1 on financial rules and the delegation of financial powers and entry 2 on residual financial sanction, together with the negative allocation in the personnel department’s charter set out in the next section.

The carve-out in entry 23(a) that hands pay to Finance

Entry 23(a) of the Department of Personnel and Training’s allocation gives that department the administration of all service rules, including the Fundamental Rules, Supplementary Rules and Civil Service Regulations, and then removes six subjects from the grant: revision of the pay structure of employees; revision of pay scales of central government employees; appointment of a Pay Commission, processing of its recommendations and their implementation; dearness allowance and other compensatory allowances and travelling allowances; any new facility to government employees by way of service conditions or fringe benefits involving significant recurring financial implications; and amendments to service rules having a predominantly financial character.

All six belong to the Department of Expenditure. This is the operative boundary in practice, and it decides where a representation should be addressed. A grievance about a pay fixation on promotion, an allowance rate or a pay commission recommendation belongs to the Department of Expenditure. A grievance about a conduct rule, a seniority list or a leave sanction belongs to the Department of Personnel and Training.

The boundary is not a clean split between rules and money. The personnel department retains, under its entry 23(c), the issue of formal orders of the Government of India on amendments to service rules including those of a predominantly financial character, so the department that signs an order is not always the department that decided its financial content.

Place in the Ministry of Finance

The Department of Expenditure is one of six departments of the Ministry of Finance, alongside the Department of Economic Affairs, the Department of Revenue, the Department of Financial Services, the Department of Investment and Public Asset Management, and the Department of Public Enterprises. The sixth was added by the Government of India (Allocation of Business) Three Hundred and Sixty-First Amendment Rules, 2021, notified on 6 July 2021, which moved the Department of Public Enterprises out of the Ministry of Heavy Industries and Public Enterprises.

The department is headed at the official level by the Secretary (Expenditure), Shri V. Vualnam, who signed Resolution F. No. 01-01/2025-E.III(A) dated 3 November 2025 constituting the 8th Central Pay Commission. The designation of Finance Secretary is a separate matter: it is conferred on the senior-most secretary among all the departments of the ministry, and it attaches to the officer rather than to the Department of Expenditure.

The department describes itself as the nodal department for overseeing the public financial management system in the Central Government and for matters connected with state finances, and states that it is responsible for the implementation of the recommendations of the Finance Commission and the Central Pay Commission. Both commissions appear in that one sentence, and the pairing is the department’s own: it handles the transfers to states that a Finance Commission recommends under entry 7 and the pay revision that a Pay Commission recommends, and it carries the cost of each into the expenditure budget it prepares.

Reading a file number: E.II(B) and E.III(A)

The section of the department that issued an order is readable from the file number, and this is the fastest way to confirm that a circulating pay order is genuine. Pay and allowance orders come from the Establishment II(B) section, written E.II(B), of the Personnel and Establishment Division. Pay commission orders come from the Establishment III(A) section, written E.III(A), of the same division.

An order carrying a suffix such as Estt.(Pay-I) is not a Department of Expenditure order at all. That is the Establishment (Pay-I) section of the Department of Personnel and Training, which issues orders on pay fixation procedure under its residual entries rather than on pay rates.

The pay and allowance orders in force

The three allowances that reach every pay slip are each fixed by a Department of Expenditure Office Memorandum, and the current orders are set out below. Rates stated are of 5 August 2026.

Dearness allowance is revised twice a year with effect from 1 January and 1 July, computed on the 12-month average of the All-India Consumer Price Index for Industrial Workers rebased to 2016 equal to 100. The revision due from 1 July 2026 had not been notified as on 1 August 2026, so 60% remains the operative rate.

The house rent allowance rates are the escalated ones. Office Memorandum No. 2/5/2017-E.II(B) dated 7 July 2017 originally fixed 24%, 16% and 8% and built in a pre-authorised increase to 30%, 20% and 10% once dearness allowance crossed 50%, which happened on 1 January 2024. No separate rate order was needed, which is a drafting device worth noting: the department wrote the future revision into the parent order rather than issuing a fresh one. The city classification that decides which rate applies is annexed through Office Memorandum No. 2/5/2014-E.II(B) dated 21 July 2015, carried forward into the 2017 order.

The pay commissions

The Department of Expenditure constitutes each Central Pay Commission by resolution, services it, receives its report and issues the rules that give the recommendations effect. Nothing in this is statutory. No Act of Parliament creates a pay commission, prescribes its composition or fixes a periodicity, and every commission since 1946 has been set up by an executive resolution of the Ministry of Finance published in the Gazette of India.

The record shows the pattern. The 7th Central Pay Commission was constituted by Resolution No. 1/1/2013-E.III(A) dated 28 February 2014 and its report is hosted on the department’s own website; its recommendations became operative through the Central Civil Services (Revised Pay) Rules, 2016, notified in the gazette on 25 July 2016, which introduced the pay matrix. The 8th Central Pay Commission was constituted by Resolution F. No. 01-01/2025-E.III(A) dated 3 November 2025 under Justice Ranjana Prakash Desai, with paragraph 5 giving it 18 months to report, a window that expires on 3 May 2027.

So the Central Pay Commission recommends and the Department of Expenditure decides. A commission’s recommendation carries no legal force until this department converts it into revised pay rules or an Office Memorandum, and the government has historically accepted some recommendations, modified others and rejected a few outright at that stage.

The Pay Research Unit and the pay bill

The Pay Research Unit is the section of the Personnel and Establishment Division that compiles the data on what the central government pays its civilian workforce, and its Annual Report on Pay and Allowances of Central Government Civilian Employees is the authoritative count. The 2023-24 report records 30.62 lakh regular civilian employees in position on 1 March 2023 against a sanctioned strength of 40.40 lakh, a vacancy rate of 24.21%, and expenditure on pay and allowances of Rs. 2,75,083.75 crore in 2022-23, which was 7.05% of the Central Government’s revenue expenditure.

Those figures are the reason the department that fixes pay is also the department that controls expenditure. A one-percentage-point movement in dearness allowance moves the wage bill by a sum that has to be found within the same expenditure budget this department prepares, which is why the terms of reference it writes for a pay commission require the commission to weigh its recommendations against the government’s capacity to pay. The count excludes the armed forces, public sector undertakings and Gramin Dak Sevaks, none of which sit on the civil pay matrix.

The General Financial Rules and the Delegation of Financial Powers Rules

Entry 1 of the department’s allocation gives it the financial rules and the delegation of financial powers, and it exercises that through two codes. The General Financial Rules, 2017, lay down the principles and procedures for public financial management and procurement. Rule 1 makes them applicable to all central Ministries and Departments and their attached and subordinate bodies, and deems them applicable to autonomous bodies except to the extent that an autonomous body’s own bye-laws provide separate financial rules approved by the government. The current consolidation published by the department is updated to 31 January 2026.

The Delegation of Financial Powers Rules, 2024, decide how much financial authority each level may exercise. They were notified by S.O. 1543(E) dated 22 March 2024, published in the Gazette of India Extraordinary, Part II, Section 3, sub-section (ii), No. 1474 of 26 March 2024, made under Article 77(3) of the Constitution, and came into force on 1 April 2024. Rule 21 of those rules repeals the Delegation of Financial Powers Rules, 1978, subject to a savings clause that preserves anything done and any order issued under the repealed rules. Under the 2024 rules, all financial powers not specifically delegated to any authority, including the creation and abolition of posts, vest in the Department of Expenditure, and no authority may sanction expenditure involving a new principle or practice likely to lead to increased expenditure in future without that department’s prior consent.

These two codes are cited less often on a pay slip than an E.II(B) allowance order, but they are the reason a Drawing and Disbursing Officer can draw and pay a salary at all, and the reason a sanction that creates a post has to travel to the Ministry of Finance.

Expenditure control: sanction, appraisal, EFC and PIB

Entry 2 makes the Department of Expenditure the residual sanctioning authority for the whole of the Union government: any financial sanction not covered by delegated powers or by a general or special order comes to it. Entry 11 makes it the appraising authority for investment and expenditure proposals of central Ministries and public sector undertakings, and gives it the Expenditure Finance Committee and Public Investment Board procedures along with the secretariat work for the Public Investment Board.

In practice a scheme of any size is appraised before it is sanctioned. The Expenditure Finance Committee examines a proposal’s cost, phasing and justification, and the Public Investment Board does the same for investment proposals, with this department providing the secretariat. Entry 10 adds scrutiny of central and state legislation having financial and economic implications, so a bill that would commit expenditure passes through the department before it is introduced.

The department also prepares the expenditure budget and works through the Financial Advisers posted in each ministry, who are the standing interface between the ministry and the expenditure control function, and who are also the channel through which a staffing study is requested.

The Controller General of Accounts and the route to a pension

Entry 6 places the Controller General of Accounts under the Department of Expenditure, in nine sub-clauses covering the general principles of government accounting and the form of accounts, reconciliation of the Union government’s cash balance with the Reserve Bank, standards of accounting in the Central Civil Accounts Offices, consolidation of the monthly and annual accounts, administration of the Central Treasury Rules and the Central Government Account (Receipts and Payments) Rules, 1983, and cadre management of the Indian Civil Accounts Service.

Sub-clause (i) is the one a pensioner meets. It allots to this department the disbursement of pension through public sector banks in respect of central civil pensioners, freedom fighters, High Court judges, former Members of Parliament and former Presidents. That work is done by the Central Pension Accounting Office under the Controller General of Accounts, which issues the Pension Payment Order authority to the paying bank and maintains the pensioner database.

The result is a split that causes a fair amount of misdirected correspondence. The rules of a central government pension, including the Central Civil Services (Pension) Rules, 2021, commutation, gratuity and family pension, are made by the Department of Pension and Pensioners’ Welfare. The money reaches the bank through the Central Pension Accounting Office under the Department of Expenditure. A question about entitlement goes to the first; a question about a payment that has not arrived goes to the second.

The Staff Inspection Unit and the Chief Adviser (Cost)

Entry 3, review of the staffing of government establishments with a view to securing economy, is worked by the Staff Inspection Unit, set up in 1964. It conducts on-the-spot work measurement studies and develops work norms for government offices and for bodies dependent wholly or substantially on government grants. A request for a study is routed through the Financial Adviser of the ministry concerned, scientific and technical organisations are outside its purview and are instead studied by a departmental committee with a Staff Inspection Unit representative as a core member, and the unit’s final report is required to be implemented by the organisation studied within three months.

Entry 4 is worked by the Office of the Chief Adviser (Cost), staffed by the Indian Cost Accounts Service, which advises Ministries and government undertakings on cost accounts matters and conducts cost investigations on their behalf. Its work includes vetting claims under price support and market intervention schemes, fixing the prices at which public sector undertakings supply goods and services to the government, and examining time and cost overruns on projects.

Neither unit sets pay, but both bear on establishment strength, which is what decides how many posts exist at a given level in the pay matrix for the central government employees who fill them.

Divisions and offices

The department’s business is carried out through six divisions and a set of offices under its administrative control.

Expenditure, Personnel and Pension: who owns what

Three departments across two ministries divide the working life of a central government employee, and a query sent to the wrong one is simply forwarded or lost.

The one crossover is the last row, and it is the source of most confusion: pension policy and pension payment sit in different ministries. Dearness relief is a further trap, because it is revised on the same dates and by the same percentage as dearness allowance but is notified by the Department of Pension and Pensioners’ Welfare, not by this department.

What this means for an employee

The Department of Expenditure is the authority behind every number on a central government pay slip. It fixes basic pay through the pay matrix notified in the revised pay rules, revises dearness allowance twice a year, sets house rent allowance and transport allowance, constitutes the pay commission that resets the entire structure, and, through the Controller General of Accounts, oversees the accounting through which both salary and pension move.

The practical test is the file number. An order carrying E.II(B) or E.III(A) is an order of this department and can be checked against doe.gov.in; an order carrying Estt.(Pay-I) is from the Department of Personnel and Training; an order carrying a P&PW suffix is from the Department of Pension and Pensioners’ Welfare. For anyone tracing where a figure in a take-home salary calculation came from, that suffix is the shortest route to the authority that set it.

Related Articles

• Department of Pension and Pensioners’ Welfare
• Department of Personnel and Training
• Central government employees in India
• Central Pay Commission
• 7th Central Pay Commission
• 8th Central Pay Commission
• 6th Central Pay Commission
• Pay matrix
• Fitment factor
• Minimum pay
• CCS (Revised Pay) Rules, 2016
• Pay fixation
• Dearness allowance
• Dearness relief
• House rent allowance
• City classification for HRA
• Transport allowance
• Central government pension
• CCS (Pension) Rules, 2021
• Commutation of pension
• Family pension
• Gratuity for central government employees
• National Pension System
• Income tax for government employees
• Take-home salary of central government employees
• Pay and Accounts Office
• Drawing and Disbursing Officer
• 7th CPC salary calculator

External references

• Department of Expenditure, Ministry of Finance
• Department of Expenditure: About the department
• Department of Expenditure: organisation structure
• Allocation of Business Rules, Department of Expenditure entries (Cabinet Secretariat)
• Government of India (Allocation of Business) Rules, 1961, order (Cabinet Secretariat)
• General Financial Rules, 2017, updated to 31 January 2026
• Delegation of Financial Powers Rules, 2024, gazette notification
• 7th Central Pay Commission report (doe.gov.in)
• Controller General of Accounts
• Central Pension Accounting Office

References

1. Government of India (Allocation of Business) Rules, 1961, made by the President under Article 77(3) of the Constitution, order dated 14 January 1961, Second Schedule, Ministry of Finance, Department of Expenditure, entries 1 to 13, entry 13 omitted vide amendment series no. 318 dated 12 September 2015 (earlier inserted vide amendment series no. 304 dated 9 October 2013).
2. Government of India (Allocation of Business) Rules, 1961, Second Schedule, Ministry of Personnel, Public Grievances and Pensions, Department of Personnel and Training, entry 23(a)(i) to (vi), carving out the pay subjects to the Ministry of Finance.
3. Government of India (Allocation of Business) Three Hundred and Sixty-First Amendment Rules, 2021, notified 6 July 2021, inserting the Department of Public Enterprises as the sixth department of the Ministry of Finance.
4. Ministry of Finance, Department of Expenditure, Office Memorandum No. 1/1(i)/2026-E.II(B), dated 22 April 2026 (dearness allowance at 60% with effect from 1 January 2026).
5. Ministry of Finance, Department of Expenditure, Office Memorandum No. 2/5/2017-E.II(B), dated 7 July 2017 (house rent allowance and the pre-authorised escalation on dearness allowance crossing 50%), and Office Memorandum No. 21/5/2017-E.II(B), dated 7 July 2017 (transport allowance).
6. Ministry of Finance, Department of Expenditure, Resolution F. No. 01-01/2025-E.III(A), dated 3 November 2025, constituting the 8th Central Pay Commission, and Resolution No. 1/1/2013-E.III(A), dated 28 February 2014, constituting the 7th Central Pay Commission.
7. Central Civil Services (Revised Pay) Rules, 2016 (gazette notification, 25 July 2016), implementing the 7th Central Pay Commission.
8. General Financial Rules, 2017, rule 1 (short title, commencement and application), as consolidated and updated to 31 January 2026 by the Department of Expenditure.
9. Delegation of Financial Powers Rules, 2024, notified by S.O. 1543(E) dated 22 March 2024, Gazette of India Extraordinary, Part II, Section 3, sub-section (ii), No. 1474 of 26 March 2024, in force from 1 April 2024, repealing the Delegation of Financial Powers Rules, 1978.
10. Annual Report on Pay and Allowances of Central Government Civilian Employees 2023-24, Pay Research Unit, Department of Expenditure (30.62 lakh employees in position on 1 March 2023 against 40.40 lakh sanctioned; Rs. 2,75,083.75 crore pay and allowances expenditure in 2022-23).
11. Department of Expenditure, organisation structure and Staff Inspection Unit pages (divisions, attached offices, Secretary (Expenditure), and the 1964 establishment, purview and three-month implementation requirement of the Staff Inspection Unit).