Finance Minister Arun Jaitley assured that he was not worried about fiscal deficit and government would be able to meet its target despite additional outgo towards the implementation of the Seventh Pay Commission.
 
While the Pay Commission headed by Justice A K Mathur suggested a 16%% increase over the basic salary plus dearness allowance (DA) 63% in allowances and 24% in pension for the central government employees.

The Pay Commission made report, assuming that the rate of Dearness Allowance would be 125 percent at the time of implementation of the pay commission recommendation, i.e. on January 1 next year.
 
The existing rates of HRA for Class X, Y and Z cities and towns are 30%, 20% and 10% of Basic pay (pay in the pay band plus grade pay). While the pay commission has revised the rates HRA for these cities to 24%, 16% and 8% respectively of new Basic pay (pay in the pay band plus grade pay multiplying by a factor of 2.57).
 
Besides the basic salary, a large portion of a central government employee’s salary is the house rent allowance; some changes have been made in that category this time.
 
Instead of the existing rates of HRA for Class X, Y and Z cities and towns are 30%, 20% and 10% of Basic pay (pay in the pay band plus grade pay). While the pay commission has revised the rates HRA for these cities to 24%, 16% and 8% respectively of new Basic pay (pay in the pay band plus grade pay multiplying by a factor of 2.57).
 
The Commission also recommends that the rate of HRA will be revised to 27 percent, 18 percent and 9 percent respectively when DA crosses 50 percent, and further revised to 30 percent, 20 percent and 10 percent when DA crosses 100 percent.
 
So the HRA segment will rise dramatically more than 100 percent of the existing House Rent Allowance (HRA).
 
By hiking House Rent Allowance, the Pay Commission has encouraged property owners to rent out their properties, which policy is likely to reduce the shortage of dwellings for all central government employees.
 
Employees who presently reside in government quarters do not get a house rent allowance.
It is noted, the Seventh Pay Commission proposed no hike in Transport Allowance (TPTA) for central government employees in its report.
 
The central government employees will not get any hike in Transport allowance on the time of implementation of the pay commission recommendation as the existing Transport allowance figure automatically reaches the Pay Commission revised Transport allowance figure after adding 125 percent DA.
 
With the increase in pay and allowances in fiscal 2016-17, the Finance Minister Arun Jaitley assured that he was not worried about fiscal deficit and government would be able to meet its target despite additional outgo towards the implementation of the Seventh Pay Commission.