The 8th Pay Commission has entered a crucial consultation phase, with employee organisations and pensioner bodies placing a series of proposals before the panel that could influence the next round of salary and pension revisions. While the fitment factor and minimum basic pay continue to dominate discussions, the demand for a revision in House Rent Allowance (HRA) has emerged as one of the most closely watched issues.
The commission, constituted on November 3, 2025, is expected to recommend changes to pay scales, allowances, pension structures and other service conditions for nearly one crore beneficiaries. These include around 50 lakh central government employees and about 65 lakh pensioners, including defence personnel and retired staff.
Headed by former Supreme Court Justice Ranjana Prakash Desai, the commission also includes former IAS officer Pankaj Jain as Member-Secretary and Professor Pulak Ghosh as a member. With stakeholder consultations underway, employee unions are pressing for reforms they say reflect today’s economic realities.
Employee Bodies Push For Higher HRA
One of the strongest demands has come from the National Council–Joint Consultative Machinery (NC-JCM), which argues that the current HRA structure no longer reflects soaring rental costs across Indian cities.
According to the employee body, HRA rates have remained largely unchanged since the implementation of the 7th Pay Commission in 2017, even as residential rents have increased sharply in several urban centres. The organisation has therefore urged the 8th Pay Commission to substantially revise HRA rates and also extend the allowance to pensioners.
The NC-JCM has proposed HRA of 40 per cent of basic pay for X-category cities, 35 per cent for Y-category cities and 30 per cent for Z-category cities. Under the existing structure, employees receive approximately 27 per cent, 18 per cent and 9 per cent, respectively, depending on the city category.
The body has also argued that entry-level employees are finding it increasingly difficult to manage rental expenses, particularly in metropolitan cities where housing costs have risen significantly over the past several years.
HRA Isn’t The Only Demand Before The 8th Pay Commission
The HRA proposal forms part of a broader package of recommendations submitted by employee representatives. Among the major suggestions are an increase in the minimum basic salary to Rs 69,000, simplification of the existing pay matrix, raising the annual increment from 3 per cent to 6 per cent, and restructuring pay levels to create a more streamlined salary framework.
Other organisations have echoed similar concerns. The All India NPS Employees Federation (AINPSEF) has proposed increasing HRA to 36 per cent, 24 per cent and 12 per cent for X, Y and Z category cities, respectively. The federation has also recommended that HRA should automatically increase whenever Dearness Allowance (DA) is revised.
Meanwhile, the Pragatisheel Shikshak Nyaya Manch (PSNM), representing teachers from Kendriya Vidyalayas, Navodaya Vidyalayas and Union Territory schools, has backed a higher HRA structure while also seeking a fitment factor ranging from 2.62 to 3.83.
Current HRA Rules And Tax Benefits
House Rent Allowance is designed to help salaried employees meet accommodation expenses, particularly in urban areas where rents are relatively higher. The allowance also offers tax benefits under Section 10(13A) of the Income Tax Act for taxpayers who continue under the old tax regime and satisfy the prescribed conditions.
Earlier this year, the Centre expanded the list of cities treated as metros for HRA purposes. Besides Delhi, Mumbai, Kolkata and Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad are now also classified as metro cities for HRA exemption. Eligible taxpayers residing in these cities can claim up to 50 per cent HRA exemption, while employees in other cities may claim up to 40 per cent, subject to applicable rules.
Employees may also claim HRA and home loan tax benefits simultaneously, provided they satisfy the eligibility requirements and can furnish proof of rent payments.
When Could The 8th Pay Commission Submit Its Report?
The commission is expected to submit its recommendations around 18 months after its constitution in November 2025. If the timeline remains unchanged, the report could be ready as early as February or April 2027.
However, recommendations do not become effective immediately. Based on previous pay commissions, implementation generally takes another two to three years after the report is submitted. As a result, any revised salary and allowance structure approved following the 8th Pay Commission may be rolled out gradually, potentially extending into 2029 or 2030.