Island Special Duty Allowance

Island Special Duty Allowance (ISDA) is a compensatory allowance paid to a central government employee posted in the Andaman and Nicobar group of Islands or in the union territory of Lakshadweep, at 10%, 16% or 20% of basic pay according to how remote the station is. It is granted by Department of Expenditure Office Memorandum No. 12/1/2017-E.II(B) dated 18 July 2017, with effect from 1 July 2017, issued in supersession of all existing orders on the subject after the government accepted the allowance recommendations of the 7th Central Pay Commission through Resolution No. 11-1/2016-IC dated 6 July 2017.

The order is seven paragraphs long and every operative rule of the allowance is in it. Paragraph 1 carries the three rates and the areas they attach to, paragraph 2 defines basic pay, paragraph 3 stops the allowance during suspension, joining time and long absences from the islands, paragraph 4 adds it to the Hard Area Allowance and sets out an election that does not touch it, paragraph 5 fixes the effective date, and paragraphs 6 and 7 settle coverage.

One feature separates this allowance from every other location payment in the 7th CPC structure. It is added rather than elected. The mainland Special Duty Allowance, granted by the sister order of the same date, is barred alongside the Tough Location Allowance; the island allowance is drawn on top of the Hard Area Allowance, so a posting in the Nicobar group or at Minicoy carries a combined 40% of basic pay in island compensation before dearness allowance and house rent allowance are counted at all.

The rates also fell rather than rose in 2017, which is the fact most summaries of the allowance get backwards. Paragraph 8.17.64 of the 7th Central Pay Commission report records the pre-revised rates as 12.5%, 20% and 25% of basic pay across the same three area categories, and paragraph 8.17.66 rationalised each by a factor of 0.8. The 25% figure that still circulates as a current entitlement is the 6th CPC rate for the more difficult areas, superseded on 1 July 2017.

The three rates and the areas each covers

Paragraph 1 of Office Memorandum No. 12/1/2017-E.II(B) dated 18 July 2017 fixes three rates by place of posting, each a percentage of basic pay drawn in the level of the pay matrix.

Two features of that table decide most claims. The capital-town band is drawn by distance and not by name: it reaches areas within 8 km of the municipal limits of Port Blair, Kavaratti and Agatti, so a station on the same island but outside that radius falls into the difficult-area band at 16% rather than the capital-town band at 10%. And the difficult-area band is residual in Lakshadweep, covering all islands except the three named elsewhere, so Kiltan, Andrott, Kalpeni, Chetlat, Kadmat, Amini and Bithra all take 16% without being listed one by one.

Minicoy is the one Lakshadweep island lifted out of the residual band into the 20% category, alongside the Andaman and Nicobar stations that are furthest from Port Blair. The Nicobar group, Little Andaman, Narcondam and East Island make up the rest of it.

The percentage is uniform within a band and the rupee amount is not. Two employees at Car Nicobar both draw 20%, but an officer at Level 13 on Rs. 1,23,100 draws Rs. 24,620 a month while a Level 4 employee on Rs. 25,500 draws Rs. 5,100 at the same station, because each takes 20% of their own basic pay.

What basic pay means for the calculation

Paragraph 2 of the order defines basic pay in the revised pay structure as the pay drawn in the prescribed level in the pay matrix, and adds that it does not include any other type of pay such as special pay. Nothing else enters the base.

That exclusion is wider than it first reads. Dearness allowance is outside it, so the Island Special Duty Allowance is never computed on pay plus dearness allowance; house rent allowance and transport allowance are outside it; a special pay, a deputation duty allowance and a personal pay are all outside it. The only additions the Fundamental Rules treat as part of basic pay for this purpose are the ones the pay matrix itself produces, the cell of the level and a stagnation increment where one has been granted.

Office Memorandum No. 13/1/2017-E.II(B) dated 14 July 2017 repeats the same definition word for word in its own paragraph 2 for the Hard Area Allowance. The two orders therefore run on an identical base, and that makes the two percentages addable rather than merely payable together.

When the allowance stops

Paragraph 3 of the order carries two separate bars and they work differently.

The first is conditional on absence from the islands. The Island Special Duty Allowance is not admissible during periods of leave, training or tour beyond full calendar months where the employee is outside the Andaman and Nicobar group of Islands and the islands of the union territory of Lakshadweep. Two conditions have to be met together: the absence has to run beyond full calendar months, and it has to be spent outside the islands. A joining time trip to the mainland inside a single calendar month does not break the entitlement, and neither does a long spell of leave spent at the island station itself.

The second is absolute. The allowance is not admissible during suspension and joining time, with no reference to where the employee happens to be. An employee under suspension at Port Blair draws subsistence allowance and no island allowance, because the payment compensates island service actually rendered rather than island residence.

The sister order for the mainland Special Duty Allowance carries an identically worded paragraph 4, so the leave, tour, suspension and joining-time treatment of the two allowances is the same and only the geography differs.

Addition to the Hard Area Allowance

The first sentence of paragraph 4 is the operative one: the Island Special Duty Allowance is admissible in addition to the Hard Area Allowance, where admissible. Paragraph 4 of Office Memorandum No. 13/1/2017-E.II(B) dated 14 July 2017 states the reciprocal, and paragraph 8.17.57 of the 7th Central Pay Commission report records that the Hard Area Allowance was already being paid in addition to the island allowance before 2016. The addition is the older of the two features and was carried forward rather than created.

The Hard Area Allowance reaches far fewer islands than the island allowance does. It runs at 20% of basic pay in the Nicobar group of Islands and at Minicoy, and at 12% at Kiltan, Andrott, Kalpeni, Chetlat, Kadmat, Amini and Bithra. Kavaratti and Agatti are excluded by the subject line of that order, and the entire Andaman group outside the Nicobar Islands is outside it altogether. The combinations that result are these.

The top of the table is the highest location compensation available to a central government civilian anywhere, 40% of basic pay in two allowances that both take basic pay as their base. The bottom three rows show how quickly it falls away: Little Andaman draws the same 20% island rate as Car Nicobar but nothing beyond it, and a Port Blair posting inside the 8 km radius draws a tenth of basic pay and no more.

The paragraph 4 election, and what it does not reach

The second sentence of paragraph 4 is the one most often misread. Where more than one special compensatory allowance is admissible at a station, the employee has the option to choose the allowance which benefits them the most, that is, the Hard Area Allowance or one of the special compensatory allowances subsumed under Tough Location Allowance Category I, II and III.

The choice named in that sentence runs between the Hard Area Allowance and the Tough Location Allowance tiers. It does not run against the Island Special Duty Allowance, which is not a special compensatory allowance within the meaning of that sentence and is not one of the alternatives offered. Whichever way the election goes, the island allowance is added to the result.

Paragraph 3 of the Hard Area Allowance order gives the same election in the same words from the other side, and paragraph 9 of Office Memorandum No. 3/1/2017-E.II(B) dated 19 July 2017, the Tough Location Allowance order, gives it a third time. Three orders describe one choice, and none of the three puts the island allowance into it.

The election is closer than it looks, because all of Lakshadweep is a Part A remote locality under Annexure I to that OM and so attracts Tough Location Allowance-I, Rs. 5,125 a month at Level 8 and below from 1 January 2024. At the Level 7 entry cell of Rs. 44,900 the Hard Area Allowance at Kadmat is Rs. 5,388 a month, only Rs. 263 more; at the 12% rate the Hard Area Allowance pays more only above basic pay of Rs. 42,708 at Level 8 and below and Rs. 55,208 at Level 9 and above.

The contrast with the mainland Special Duty Allowance

Office Memorandum No. 11/1/2017-E.II(B) dated 18 July 2017 grants the Special Duty Allowance at a flat 10% of basic pay to central government employees serving in the North Eastern Region and Ladakh. It was signed on the same day, by the same Joint Secretary, in the same supersession formula, and it defines basic pay in the same words. The two orders diverge on one paragraph each.

Paragraph 3 of the mainland order provides that the Special Duty Allowance is not admissible along with the Tough Location Allowance, and then offers an additional option: an employee may take the Special Compensatory (Remote Locality) Allowance at 6th Central Pay Commission rates along with the Special Duty Allowance at revised rates. That is a choice between one revised allowance and a pair in which the location component is frozen at pre-revised rates. Paragraph 4 of the island order, by contrast, adds the Hard Area Allowance at its full revised rate with no freeze and no election.

The graded structure on the island side is the reason for the divergence. The mainland order covers a contiguous region where the hardship is broadly similar across stations, so one rate serves. The islands run from a municipal town on the main island to Narcondam, and the order prices that spread in three bands rather than one.

What the 7th Central Pay Commission changed, and what it left alone

Paragraph 8.17.64 of the 7th Central Pay Commission report sets out the pre-revised structure in full: 12.5% of basic pay for areas around the capital towns, 20% for the difficult areas and 25% for the more difficult areas, over exactly the area definitions that survive in the 2017 order. Paragraph 8.17.65 records demands to increase the rate. Paragraph 8.17.66 rejected them and rationalised the allowance by a factor of 0.8 to 10%, 16% and 20% of basic pay.

Each band was multiplied by the same 0.8 and nothing else moved. The three area categories, the places in each of them, the addition to the Hard Area Allowance and the percentage-of-pay design all came through unchanged. The Commission’s own summary table of 196 allowances lists the entry at serial number 91 as retained and rationalised by a factor of 0.8, and the parallel Hard Area Allowance entry at serial number 74 in the same terms.

The 0.8 was general rather than an island judgment. Item 4 of paragraph 8.2.5 gives the reasoning: allowances that are a fixed amount but not indexed to dearness allowance were raised by 2.25, those partially indexed by 1.5, those fully indexed not at all, and percentage-based allowances were rationalised by 0.8 having regard to the increase in the pay structure and to the raise granted to slab-based allowances.

That last clause is what stops the cut from being a loss. Basic pay itself rose by a fitment factor of 2.57 on 1 January 2016, so a rate multiplied by 0.8 on a base multiplied by 2.57 leaves the rupee amount at about 2.06 times its pre-revised figure. An employee whose pre-revised basic pay was Rs. 20,000 drew Rs. 5,000 a month at the 25% Nicobar rate; the same pay revised to Rs. 51,400 draws Rs. 10,280 at 20%.

Why there is no dearness-allowance step-up

The 7th CPC structure lifts a fixed-rupee allowance by 25% each time dearness allowance crosses a 50% milestone, which is how the Tough Location Allowance moved from Rs. 1,200 to Rs. 1,500 on 1 January 2024. The Island Special Duty Allowance carries no such step and needs none.

A percentage allowance revalues itself. Every movement in basic pay carries the allowance with it in the same proportion, so the annual increment of one cell in the level, a pay fixation on promotion, and the next pay commission each raise the allowance without any order being issued about the allowance at all. At Level 7 the increment from Rs. 44,900 to Rs. 46,200 lifts the 20% rate from Rs. 8,980 to Rs. 9,240 a month, an increase of Rs. 260 that no file has to sanction.

Dearness allowance still runs alongside at 60% of basic pay, and it is computed on basic pay alone. The island allowance is not part of the base for it, and dearness allowance is not part of the base for the island allowance. The two are parallel percentages of the same figure.

Worked figures at four pay levels

The arithmetic is a single multiplication, and the point of setting it out is the spread between stations at the same level and between levels at the same station. All figures are monthly and use the first cell of each level.

The Nicobar column is the island allowance and the Hard Area Allowance together, the Kadmat column is 16% and 12% together, and the last two columns are the island allowance alone because no Hard Area Allowance reaches those stations.

Read across the Level 7 row and the station is worth Rs. 13,470 a month, the difference between Rs. 17,960 at Car Nicobar and Rs. 4,490 at Port Blair, on identical basic pay. Read down the Nicobar column and the level is worth Rs. 39,040 a month, the difference between Level 4 and Level 13 at the same station. Over a year the Level 7 employee at Car Nicobar takes Rs. 2,15,520 in island allowances and the Level 4 employee Rs. 1,22,400.

None of these figures include dearness allowance, house rent allowance or travelling allowance, all of which are drawn separately and none of which the island allowances displace.

Reckonability for pension, gratuity and the NPS contribution

The Island Special Duty Allowance counts for none of the three, so a full career on island postings adds nothing to the retirement outcome beyond what the pay level itself carries.

Rule 31 of the CCS (Pension) Rules, 2021 defines emoluments for pension as the basic pay drawn under the Fundamental Rules immediately before retirement or death, plus non-practising allowance granted to a medical officer in lieu of private practice, with a stagnation increment added by the Explanation. No compensatory allowance enters that definition. Retirement gratuity adds exactly one further item, the dearness allowance admissible on the date of retirement or death, and the island allowance is not it.

Rule 5(1) of the CCS (Implementation of National Pension System) Rules, 2021, notified by G.S.R. 227(E) dated 30 March 2021, limits the contribution base to basic pay, non-practising allowance and admissible dearness allowance in a calendar month. The Unified Pension Scheme runs on the same base as the National Pension System. A Level 11 officer drawing Rs. 27,080 a month in island allowances at Car Nicobar carries none of it into the corpus, and the employer contribution is computed as though the posting were in Delhi.

The consequence is worth stating plainly for anyone weighing a long island tenure. The allowance is cash in hand for the years it is drawn and nothing afterwards.

Tax treatment

The Island Special Duty Allowance is taxable as salary in full, under the default regime and the old regime alike. For the tax year 2026-27 the governing law is the Income-tax Act, 2025 (Act No. 30 of 2025), in force from 1 April 2026, whose Schedule III carries the prescribed-allowance exemptions formerly in Section 10(14) of the repealed Income-tax Act, 1961, read with the Income-tax Rules, 2026 notified by Central Board of Direct Taxes Notification No. 22/2026, G.S.R. 198(E), dated 20 March 2026.

The 2026 Rules name the allowance for the first time, and only for the armed forces. Serial 14 of the Table in rule 280(2) exempts “any special allowance granted to the member of the armed forces in the nature of Island (duty) allowance or Island Special Duty Allowance” at 10% of basic pay around the capital towns of Port Blair, Kavaratti and Agatti, 16% in the difficult areas and 20% in the more difficult areas. Those are the three bands and the three rates at which the allowance is itself paid, so a service member drawing it is exempt on all of it in the old regime.

A civilian employee is outside that entry. Serial 14 is confined by its own words to a member of the armed forces, exactly as the predecessor was: Rule 2BB(2) of the repealed Income-tax Rules, 1962 carried an island duty allowance exemption of Rs. 3,250 a month for the same territories, also confined to the armed forces, and that figure governs the return for the financial year 2025-26. The remote locality entries at serials 1, 2 and 3 of the rule 280(2) table are keyed to the Tough Location Allowance lists and are not the head under which the island allowance is paid.

The default regime removes the question entirely. Section 202 of the Income-tax Act, 2025 leaves a new-regime assessee only the travel, daily and conveyance allowances and the transport allowance for a disabled employee, so every prescribed-allowance exemption is withdrawn and the island allowance is taxed rupee for rupee.

The size of the entitlement is what makes this worth planning for rather than noting. A Level 11 officer at Car Nicobar adds Rs. 3,24,960 a year of fully taxable salary through the two island allowances, and a Level 13 officer adds Rs. 5,90,880. For the comparison across regimes see old versus new tax regime and income tax for central government employees.

Who administers it, and which employees the order reaches

The Department of Expenditure administers the civilian entitlement through Office Memorandum No. 12/1/2017-E.II(B), addressed to all ministries and departments of the Government of India on the standard distribution list, with copies to the Comptroller and Auditor General, the Union Public Service Commission, the Chief Secretary of the Andaman and Nicobar Islands and the Administrator of Lakshadweep.

Paragraph 6 extends the same order to civilian employees paid from the Defence Services Estimates, with the expenditure charged to the relevant head of those estimates, and leaves armed forces personnel and railway employees to separate orders of the Ministry of Defence and the Ministry of Railways. A civilian storekeeper in a naval establishment at Port Blair is therefore covered by this order, while a sailor at the same establishment is covered by the defence order.

Paragraph 7 issues the order with the concurrence of the Comptroller and Auditor General of India in so far as employees of the Indian Audit and Accounts Department are concerned, the standard constitutional courtesy under Article 148(5) for service conditions in that department.

Eligibility inside the covered group turns on the station and nothing else. Grade, cadre, service and the nature of the duty are all irrelevant: a Level 2 employee and a Level 13 officer at the same island station draw the same percentage. A transfer into an island area brings the allowance from the date of joining and a transfer out ends it, because the payment attaches to the place.

Distinctions from the neighbouring allowances

The Island Special Duty Allowance is not part of the risk and hardship allowance matrix. The 7th CPC placed 51 allowances in its Risk and Hardship Matrix and reported the island allowance separately, in the Other Allowances chapter at paragraph 8.17.64. The matrix pays a cell rate for a specific hazardous or arduous duty actually performed, such as a field-area posting or flying duty. The island allowance pays a flat percentage to everyone posted in a geography, whatever their duty.

It is not the house rent allowance either. House rent allowance compensates the cost of housing by city class and is drawn alongside the island allowance without either affecting the other. Port Blair and Kavaratti are Z-class cities for house rent allowance purposes, so an employee there draws house rent allowance at the Z rate and the island allowance at 10%, on the same basic pay, under two unrelated orders.

The Tough Location Allowance is the allowance the island entitlement is most often confused with, because both descend from the pre-2016 compensatory family. The Tough Location Allowance absorbed the Special Compensatory (Remote Locality) Allowance, the Bad Climate Allowance, the Tribal Area Allowance and the Sunderban Allowance into three rupee-denominated cells of the matrix. The island allowance was not absorbed into anything and remains a percentage allowance in its own order.

Three claims about the allowance that are wrong

The rate is not 25%. That was the 6th CPC rate for the more difficult areas, recorded at paragraph 8.17.64 of the 7th CPC report and superseded on 1 July 2017. The current top rate is 20%, and the order that fixed it was issued in supersession of all existing orders on the subject.

The 7th CPC did not create the three-band structure. Paragraph 8.17.64 shows the same three bands, with the same places in each, already in force before 2016. What the Commission changed was the number in each band, and it changed all three in the same direction and by the same factor.

Kavaratti and Agatti do not draw the Hard Area Allowance. They are named out of it in the subject line of Office Memorandum No. 13/1/2017-E.II(B) and appear nowhere in its rate table, so the capital-town islands of Lakshadweep draw the 10% island allowance and nothing more. The 40% combined figure belongs to the Nicobar group and Minicoy alone.

Bearing on the 8th Central Pay Commission

Nothing about the allowance after the 8th Central Pay Commission is on the record. The 8th Central Pay Commission was constituted by a Ministry of Finance notification of 3 November 2025 under the chairpersonship of Justice Ranjana Prakash Desai, with 18 months from constitution to submit its recommendations. It has not reported.

Three questions sit open and none of them can be answered in advance. Whether the three bands survive, whether the rates are rationalised again by a factor applied to a larger base, and whether the addition to the Hard Area Allowance is retained are all matters for the Commission and then for the government order that accepts or modifies what it recommends. The 7th CPC precedent is that a percentage allowance can be cut in rate and still rise in rupees, so a lower headline percentage in the next round would not by itself mean a smaller entitlement.

The position until then is the one set on 1 July 2017: 10%, 16% and 20% of basic pay by area, added to the Hard Area Allowance where that allowance reaches.

Related Articles

• Hard Area Allowance
• Special Duty Allowance
• Tough Location Allowance
• Special Compensatory (Remote Locality) Allowance
• Bad Climate Allowance
• Risk and Hardship Allowance
• Field Area Allowance
• High Altitude and Siachen Allowance
• Allowances for central government employees
• Allowances abolished by the 7th CPC
• Dearness allowance
• House rent allowance
• Transport allowance
• Travelling allowance
• Composite Transfer Grant
• Children Education Allowance
• Joining time
• Basic pay
• Pay matrix
• Annual increment
• Pay fixation
• Fundamental Rules
• CCS (Pension) Rules, 2021
• Central government pension
• Gratuity for central government employees
• National Pension System
• Unified Pension Scheme
• Income-tax Act, 2025
• Income tax for central government employees
• Old versus new tax regime
• Central Board of Direct Taxes
• Department of Expenditure
• 7th Central Pay Commission
• 8th Central Pay Commission
• Central government employees in India
• Take-home salary for central government employees
• Central Armed Police Forces
• Military Service Pay
• Salary by pay level
• 7th CPC salary calculator

External references

• Island Special Duty Allowance order, Department of Expenditure
• Special Duty Allowance order, Department of Expenditure
• Report of the Seventh Central Pay Commission
• Department of Expenditure, orders and circulars
• Department of Expenditure, Ministry of Finance
• Department of Personnel and Training
• Income Tax Department

References

1. Ministry of Finance, Department of Expenditure, Office Memorandum No. 12/1/2017-E.II(B) dated 18 July 2017: Island Special Duty Allowance at 10%, 16% and 20% of basic pay by area; paragraph 2 (meaning of basic pay); paragraph 3 (leave, training, tour, suspension and joining time); paragraph 4 (addition to Hard Area Allowance, and the option between Hard Area Allowance and Tough Location Allowance Category I, II and III); paragraph 5 (effect from 1 July 2017); paragraphs 6 and 7 (Defence Services Estimates civilians, and the concurrence of the Comptroller and Auditor General).
2. Ministry of Finance, Department of Expenditure, Office Memorandum No. 11/1/2017-E.II(B) dated 18 July 2017: Special Duty Allowance at 10% of basic pay for the North Eastern Region and Ladakh; paragraph 3 (bar on Tough Location Allowance and the Special Compensatory (Remote Locality) Allowance option at 6th CPC rates).
3. Ministry of Finance, Department of Expenditure, Office Memorandum No. 13/1/2017-E.II(B) dated 14 July 2017: Hard Area Allowance at 20% and 12% of basic pay; paragraph 3 (the election) and paragraph 4 (addition to the Island Special Duty Allowance).
4. Ministry of Finance, Department of Expenditure, Office Memorandum No. 3/1/2017-E.II(B) dated 19 July 2017: Tough Location Allowance rates, and paragraph 9 on the option involving the Hard Area Allowance and the Island Special Duty Allowance.
5. Ministry of Finance, Department of Expenditure, Resolution No. 11-1/2016-IC dated 6 July 2017: government acceptance of the 7th Central Pay Commission recommendations on allowances, effective 1 July 2017.
6. Report of the Seventh Central Pay Commission, November 2015: paragraph 8.2.5 item 4 (rationalisation of percentage-based allowances by a factor of 0.8); paragraph 8.17.57 (Hard Area Allowance, paid in addition to the Island Special Duty Allowance); paragraphs 8.17.64 to 8.17.66 (Island Special Duty Allowance, pre-revised rates of 12.5%, 20% and 25%, and the rationalised rates); paragraphs 8.17.115 to 8.17.118 (Special Duty Allowance); serial numbers 74 and 91 of the summary table of allowances.
7. CCS (Pension) Rules, 2021, rules 31 and 32 (emoluments and average emoluments); CCS (Implementation of National Pension System) Rules, 2021, notified by G.S.R. 227(E) dated 30 March 2021, rule 5(1) (contribution base).
8. Income-tax Act, 2025 (Act No. 30 of 2025), in force from 1 April 2026: Schedule III (prescribed allowances) and Section 202 (the default regime), read with the Income-tax Rules, 2026 notified by Central Board of Direct Taxes Notification No. 22/2026, G.S.R. 198(E), dated 20 March 2026.
9. Ministry of Finance notification dated 3 November 2025 constituting the 8th Central Pay Commission under the chairpersonship of Justice Ranjana Prakash Desai.