Why Allowances Matter More Than Basic Pay
For most government employees — especially BPS 1–16 — allowances can add up to 60–80% on top of basic pay. Understanding exactly what you are entitled to helps you check your pay slip, dispute errors, and plan your finances.
This guide covers every standard allowance for federal government employees under Finance Division rules, effective July 2026.
1. House Rent Allowance (HRA)
HRA is the largest allowance for most employees. It is calculated as a percentage of basic pay:
| City / Area | HRA Rate |
|---|---|
| A-class cities: Islamabad, Rawalpindi, Lahore, Karachi, Quetta, Peshawar | 45% of basic pay |
| B-class cities and all other urban areas | 30% of basic pay |
| Remote / difficult areas (as notified) | 30% + Remote Allowance |
Important: If you are provided government accommodation (a government quarter), you are not entitled to HRA. If you vacate the quarter, HRA becomes payable again.
Because HRA is tied to basic pay, the 25% salary increase also increases your HRA proportionally.
2. Medical Allowance
Medical allowance is a fixed monthly amount based on your BPS grade. It does not increase with the 25% salary increase — it remains fixed unless revised separately by Finance Division:
| BPS Grade | Monthly Medical Allowance |
|---|---|
| BPS 1–4 | ₨4,000 |
| BPS 5–10 | ₨6,000 |
| BPS 11–15 | ₨8,000 |
| BPS 16–19 | ₨12,000 |
| BPS 20–22 | ₨15,000 |
In addition to monthly medical allowance, all federal employees and their dependent family members are entitled to free treatment at federal government hospitals. Budget 2026 also introduced a ₨1 million health insurance cover for all federal employees.
3. Conveyance Allowance
Conveyance allowance covers daily commuting costs and is also a fixed amount by grade:
| BPS Grade | Monthly Conveyance Allowance |
|---|---|
| BPS 1–5 | ₨1,500 |
| BPS 6–10 | ₨2,000 |
| BPS 11–16 | ₨3,000 |
| BPS 17–19 | ₨5,000 |
| BPS 20–22 | ₨8,000 |
Note: BPS 17–22 officers are typically entitled to a government vehicle for official use. If a government vehicle is provided, conveyance allowance may not be separately payable.
4. Children Education Allowance
Government employees with school-going children are entitled to an education allowance of ₨3,000 per child per month (doubled in Budget 2026 from ₨1,500), for a maximum of two children. This is claimable for children studying in recognised educational institutions up to matriculation (Grade 10).
5. Special Allowance / Special Pay
Certain positions, departments, or postings carry additional special allowances. Common examples include:
- Project Allowance — for employees posted to specific development projects
- Secretariat Allowance — for staff working in federal secretariat
- Risk Allowance — for police, fire brigade, and certain hazardous duty roles
- Difficult Area Allowance — for postings in FATA, GB, AJK, or remote districts
- Charge Allowance — when an officer is officiating in a senior role
6. Overtime Allowance
Non-gazetted employees (BPS 1–16) are entitled to overtime pay for work beyond official hours, at a rate prescribed by Finance Division. Gazetted officers (BPS 17 and above) are generally not entitled to overtime allowance.
7. Deputation Allowance
When an employee is posted on deputation to another department or organisation, they may receive a deputation allowance (typically 20% of basic pay) for the duration of their deputation.
Sample Full Salary Calculation — BPS-17 in Islamabad
| Component | Amount |
|---|---|
| Basic Pay (minimum, after 25% increase) | ₨123,750 |
| House Rent Allowance (45%) | ₨55,688 |
| Medical Allowance | ₨12,000 |
| Conveyance Allowance | ₨5,000 |
| Gross Salary | ₨196,438 |
Use our calculator for your specific grade and city: