8th Pay Commission: Old Allowances May Be Removed – What It Means for Salary and Pension

Central government employees and pensioners across India are eagerly awaiting the official notification of the 8th Pay Commission. While the government has not yet released the final Terms of Reference (ToR), experts believe that this time, several outdated allowances could be abolished to simplify the salary structure. The big question is: will this impact the take-home pay of employees and the pension benefits of retirees?

Lessons from the 7th Pay Commission

The experience of the 7th Pay Commission gives some insight into what might be expected. At that time, a total of 196 allowances were reviewed. Out of these, 52 were abolished, while 36 were merged with other allowances. Several allowances were either restructured or renamed to align with new administrative requirements. Experts suggest that a similar approach could be followed in the 8th Pay Commission, with the focus on "fewer allowances, more transparency."

Which Allowances Could Be Removed?

According to senior officials familiar with pay commission discussions, allowances that have become redundant due to digitalization and new administrative systems may be discontinued. These could include:

• Travel Allowance (TA) in certain cases where digital reimbursements are possible.

• Special Duty Allowance (SDA) in select departments.

• Minor regional allowances that no longer serve a distinct purpose.

• Old clerical or typing allowances, which are now considered outdated in the digital era.

The objective behind removing such allowances is to create a transparent, simplified pay structure that reflects current work practices rather than outdated administrative categories.

Will Employees’ Salaries Be Affected?

The prospect of allowances being scrapped naturally raises concerns among employees. However, experts point out that such changes are not likely to reduce overall earnings. Typically, when certain allowances are abolished, the government compensates by revising the basic pay and increasing the Dearness Allowance (DA).

This adjustment ensures that employees do not lose out financially. Pensioners also benefit, since pensions are calculated on the basis of basic pay plus DA, not on multiple individual allowances. Therefore, a stronger basic structure may actually improve retirement benefits.

Current Status of the 8th Pay Commission

As of now, the government has not released the official notification for the 8th Pay Commission. The appointment of the Chairperson and other members, along with the announcement of the Terms of Reference, is still pending. The ToR will define the areas of focus, including salary structure, allowances, and additional employee benefits.

Earlier in January 2025, the Modi government had formally announced the constitution of the 8th Pay Commission and invited suggestions from various stakeholders. Since then, employees and pensioners have been waiting for clarity on how their salaries and pensions will be revised.

What to Expect Going Forward

The government’s guiding principle this time is expected to be “rationalization of allowances”. Rather than continuing with a long list of small, outdated perks, the aim is to consolidate or remove them, while strengthening the salary and pension framework through higher basic pay and DA.

For employees, this could mean a more streamlined payslip and fewer complications in accounting. For pensioners, the impact could be even more beneficial, as higher basic pay translates into better pension calculations in the long run.

Final Word

The 8th Pay Commission has not yet been finalized, but if past patterns are any indication, the changes will likely balance the removal of outdated allowances with an increase in basic pay and DA. Central government employees and pensioners may see a simpler, more transparent pay structure that safeguards overall earnings while reducing administrative complexity.

Until the official notification is released, speculation will continue. But one thing is certain: the 8th Pay Commission will once again play a crucial role in shaping the financial future of millions of government workers and retirees in India.