Non-Practising Allowance

Non-Practising Allowance (NPA) is an allowance paid to central government medical, dental and veterinary officers in return for their giving up the right to private practice. Under the 7th Central Pay Commission it is 20% of basic pay, subject to the condition that basic pay plus NPA together do not exceed Rs. 2,37,500 a month. It is granted by the Department of Expenditure and the concerned administrative ministries, with effect from 1 July 2017.

This article explains the allowance in full: the 20% rate and why the 7th Central Pay Commission cut it from 25%, the ceiling and how it bites on senior doctors, the crucial rule that NPA counts as pay for dearness allowance and pension but not for house rent allowance, who is eligible, worked examples at both ends of the scale, the separate orders for the different medical services, and the tax position.

NPA sits within the wider system of allowances for central government employees, but it is unusual in one respect: it is not a reimbursement or a compensatory payment, it is compensation for surrendering a professional right, the right of a qualified doctor to earn from private practice.

What NPA is, and who receives it

A qualified doctor in government service could, in principle, run a private practice alongside the government job and earn from it. Government service, however, requires the doctor to devote full attention to official duties, so the right to private practice is withdrawn. NPA is the money paid in exchange for that withdrawal. It is, in effect, a buy-out of private-practice income, fixed as a percentage of pay rather than tied to what any individual doctor might have earned.

The main recipients are the officers of the Central Health Service, the government’s cadre of doctors, together with dental officers, veterinary officers, the medical officers of the Indian Railways under the Indian Railway Medical Service, and the officers of the Armed Forces Medical Services. In each case the common thread is a recognised medical qualification and the surrender of private practice.

Because NPA is a percentage of basic pay, it rises automatically as the doctor moves up the pay matrix, and it is drawn month by month alongside pay, not claimed against bills.

The 20% rate and the cut from 25%

Before the 7th Central Pay Commission, NPA was 25% of basic pay, where basic pay in the 6th CPC structure meant pay in the pay band plus grade pay. The 7th Central Pay Commission reviewed all percentage-based allowances and applied a uniform rationalisation: because the new pay matrix already delivered a large rise in basic pay, most percentage allowances were multiplied by a factor of 0.8 so that the rupee amounts did not balloon. Applying that factor to NPA took it from 25% to 20%.

The government accepted the recommendation, and NPA became 20% of basic pay with effect from 1 July 2017. It is important to read the percentage against the base. “Basic pay” here means basic pay as defined in Rule 3 of the Central Civil Services (Revised Pay) Rules, 2016, that is, the pay drawn in the prescribed level of the pay matrix. It does not include dearness allowance or any other allowance. So NPA is 20% of the pay-matrix cell figure alone.

For most doctors the switch from 25% to 20% did not mean a fall in rupees, because the pay-matrix basic pay was itself far higher than the old pay band plus grade pay. A lower percentage of a much larger base still worked out higher than before.

The ceiling: basic pay plus NPA within Rs. 2,37,500

The 7th Central Pay Commission attached a ceiling to NPA. The sum of basic pay and NPA must not exceed Rs. 2,37,500 a month. That figure is not arbitrary: it is the average of the apex pay of Rs. 2,25,000, drawn at Level 17, and the Cabinet Secretary’s pay of Rs. 2,50,000 at Level 18. The ceiling exists so that a doctor’s basic pay together with NPA does not overtake the pay of the highest civil servants.

For a doctor whose basic pay is comfortably below the apex, the ceiling never comes into play and the full 20% is drawn. It bites only at the very top of the medical hierarchy, on the senior-most professors and directors whose basic pay is already close to the apex.

Worked at both ends, the rule looks like this:

In the last two rows the full 20% would push the total past Rs. 2,37,500, so NPA is cut back to whatever keeps the sum at exactly Rs. 2,37,500. A doctor at the apex basic pay of Rs. 2,25,000 therefore draws only Rs. 12,500 of NPA instead of the notional Rs. 45,000.

NPA counts as pay for some things, not others

The single most valuable feature of NPA is that it is treated as pay, not merely as an allowance, for important purposes. Three points settle almost every question that arises.

First, NPA counts as pay for dearness allowance. The dearness allowance percentage is applied to basic pay plus NPA, so a doctor’s dearness allowance is larger than that of a non-medical officer on the same basic pay. As the dearness allowance rate climbs, the value of NPA compounds.

Second, NPA counts as pay for retirement benefits. The NPA drawn on the date of retirement is included in the emoluments reckoned for pension and gratuity within the applicable rules. This is why a retired doctor’s pension is higher than that of a non-medical colleague who retired on the same basic pay, and it carries through to the gratuity as well.

Third, NPA does not count as pay for house rent allowance, which is calculated on basic pay alone. It is worth being precise about how that exception arises, because the order does not work as a list of inclusions. Condition (ii) of the Office Memorandum of 7 July 2017 sets the default the other way round: NPA “shall continue to be treated as pay for the purpose of computation of Dearness Allowance and other allowances, except those allowances in respect of which the applicable orders provide otherwise, including calculation of retirement benefits.”

So NPA counts as pay for every allowance unless the order governing that allowance says otherwise. House rent allowance is an exception created by the house rent allowance order, not a limit written into the NPA order. Reading the provision as a short list of inclusions is what causes the recurring confusion about whether NPA enters this or that allowance.

Condition (i) settles what “basic pay” means for both the 20% and the ceiling: basic pay as defined in Rule 3(x) of the CCS (Revised Pay) Rules, 2016, that is the pay drawn in the prescribed Level of the pay matrix. Dearness allowance is not part of it, so the Rs. 2,37,500 ceiling is a ceiling on basic pay plus NPA alone and does not move as dearness allowance rises.

Eligibility and the medical-qualification test

NPA is not open to everyone with a medical role. It is restricted to those medical posts for which a medical qualification recognised under the Indian Medical Council Act, 1956, or the Dentists Act, 1948, has been prescribed as an essential qualification for the post. The test is about the post and its recruitment rules, not merely about whether the individual happens to hold a degree.

The qualification test is only the first hurdle. Condition (iii) of the Office Memorandum of 7 July 2017 requires four further conditions to be fulfilled, and they are cumulative:

• (a) the post is a clinical one;
• (b) the post is a whole time post;
• (c) there is ample scope for private practice; and
• (d) it is necessary to prohibit private practice in public interest.

Conditions (c) and (d) are the ones that explain the allowance. NPA is the price of a prohibition, so it is payable only where there was something real to give up and where prohibiting it serves a public purpose. A medical post with no realistic scope for private practice fails condition (c) whatever qualification is prescribed for it.

Two consequences follow from the qualification test itself. A person holding a medical degree but appointed to a post that does not require one as an essential qualification does not draw NPA, because the test attaches to the post and its recruitment rules rather than to the individual. And the officer must actually forgo private practice, since the allowance is the consideration for that surrender.

The separate orders for each medical service

Although the rate and the ceiling are common, NPA is not granted by a single order. Each administrative authority issued its own order to give effect to the 7th Central Pay Commission decision:

The parent order says so on its face. Its subject is the revision of NPA “in respect of medical posts other than the posts included in the Central Health Services”, so the Central Health Services are expressly outside it, and paragraph 5 with the endorsement sets out who covers the rest.

Paragraph 5 provides that for medical posts under the Ministries of Railways and Defence and the Department of Atomic Energy, separate orders will be issued by the concerned administrative authorities, and the endorsement asks the Ministry of Health and Family Welfare and the Ministry of AYUSH to issue similar orders for posts under the Central Health Services and under AYUSH respectively.

The substance, 20% of basic pay with the Rs. 2,37,500 ceiling and effect from 1 July 2017, is common to all of them. Only the issuing authority and the cadre differ. Practically, a doctor looking for the order that governs their own post should look to their administrative ministry rather than to the Department of Expenditure order, unless the post sits in a central civil post outside the Central Health Services.

The tax position

NPA is fully taxable. No provision of the Income-tax Act exempts it, and because it is treated as part of pay it is taxed as salary in exactly the same way as basic pay and dearness allowance. It is added to gross salary, forms part of the income on which the standard deduction and the slab rates operate, and there is no special deduction for it. The income tax for government employees article sets out how the salary heads combine, and the same treatment carries into retirement, where a doctor’s higher pension, lifted by NPA, is likewise taxable as covered in income tax for pensioners.

The 7th CPC rationale and the 8th CPC outlook

NPA is a clear example of the 7th Central Pay Commission’s method: a percentage allowance was rationalised down by the 0.8 factor, but the sharp rise in basic pay under the new pay matrix meant that doctors were not left worse off in rupees. The commission also considered and rejected the idea of subsuming NPA into pay or abolishing it, retaining it as a distinct allowance because the surrender of private practice remains a real cost to the doctor.

Whether the 8th Central Pay Commission retains 20%, changes the rate, or alters the ceiling is unknown, and no figure for NPA after the 8th CPC can be stated as fact until that commission reports and its recommendations are accepted. Until then, the position is 20% of basic pay, capped so that basic pay plus NPA stays within Rs. 2,37,500.

Related Articles

• Basic pay
• Dearness allowance
• House rent allowance
• Pay matrix
• Allowances for central government employees
• Central Health Service
• Central Government Health Scheme
• Nursing allowance
• Department of Expenditure
• 7th Central Pay Commission
• 8th Central Pay Commission
• Pay fixation on promotion
• Gratuity for central government employees
• Income tax for government employees
• Income tax for pensioners
• Take-home salary for central government employees
• Central government employees in India
• Running allowance

External references

• Department of Expenditure
• Ministry of Health and Family Welfare
• 7th Central Pay Commission report

References

1. Ministry of Finance, Department of Expenditure, Office Memorandum No. 12-2/2016-E.III.A dated 7 July 2017, “Grant of Non-Practising Allowance (NPA) to the Medical Officers of Central Health Service and other posts” (NPA at 20% of basic pay with effect from 1 July 2017, subject to basic pay plus NPA not exceeding Rs. 2,37,500).
2. Report of the Seventh Central Pay Commission, November 2015, Chapter 8 on allowances (recommendation to reduce NPA from 25% to 20% by the 0.8 factor and to cap basic pay plus NPA at the average of the apex and Cabinet Secretary levels).
3. Central Civil Services (Revised Pay) Rules, 2016, Rule 3 (definition of “basic pay” as pay in the prescribed level of the pay matrix).
4. Ministry of Railways (Railway Board) order RBE No. 82/2017 dated 2017 (grant of NPA at the revised rate to Indian Railway Medical Service officers).
5. Resolution of the Government of India, Ministry of Finance, Department of Expenditure, dated 6 July 2017 on the recommendations of the Seventh Central Pay Commission on allowances (acceptance of the NPA recommendation with effect from 1 July 2017).
6. Report of the Seventh Central Pay Commission, paragraphs 8.17.78 and 8.17.79: NPA then paid at 25% of basic pay to medical doctors occupying posts for which a minimum qualification of a medical degree is prescribed, the demand to raise it to 40%, and the recommendation that in line with the general approach of rationalising percentage based allowances by a factor of 0.8 it be paid at 20% of basic pay subject to basic pay plus NPA not exceeding the average of the Apex Level and the level of Cabinet Secretary.
7. Ministry of Finance, Department of Expenditure Office Memorandum F. No. 12-2/2016-E.III.A dated 7 July 2017, on medical posts other than those included in the Central Health Services: paragraph 3, NPA at 20% of basic pay in the revised pay structure subject to basic pay plus NPA not exceeding Rs. 2,37,500, with condition (i) defining basic pay by Rule 3(x) of the CCS (Revised Pay) Rules 2016, condition (ii) treating NPA as pay for dearness allowance and other allowances except where the applicable orders provide otherwise and for retirement benefits, and condition (iii) restricting it to posts requiring qualifications recognised under the Indian Medical Council Act 1956 or the Dentist Act 1948 and satisfying the four further conditions; paragraph 4, effect from 1 July 2017; and paragraph 5 with the endorsement, allocating separate orders to Railways, Defence, the Department of Atomic Energy, the Ministry of Health and Family Welfare and the Ministry of AYUSH.
8. Ibid., referring to the earlier rates in Office Memorandum No. 7(19)/2008-E-IIIA dated 30 August 2008, and to Resolution No. 11-1/2016-IC dated 6 July 2017 notifying the government’s decisions on the 7th CPC recommendations on allowances.