After a long wait, the Committee on Allowances is likely to submit its report to Finance Minister Arun Jaitley on Monday.
The committee, headed by Finance Secretary Ashok Lavasa, was given time till February 22 to table its report.
The revised allowances are likely to be effective from April 1.
The house rent allowance (HRA), which forms a crucial part of government employees' salary, is expected to be fixed at 30 per cent of the basic pay for employees in metros which have a population of 50 lakh and above.ALSO READ: 7th Pay Commission: Government starts releasing arrears for defence pensioners
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The Seventh Pay Commission had recommended 24 per cent of the basic pay as HRA against the 30 per cent of basic pay under the Sixth Pay Commission.
The Committee on Allowances was formed in July last year to review the recommendations of the pay commission after employees protested against the proposed slash in the HRA. The pay commission also recommended doing away with 53 of the 196 allowances and merging a few others.
The committee was initially given four months to table its report, which was later extended to February 22, 2017. If reports are to be believed, the Central government is likely to move ahead with the committee's report after March 15 when Assembly elections will be over.
If the government decides to pay a 30 per cent of basic pay as HRA to its employees, the cost estimate comes to Rs 29,300 crore in the first year.
The hiked salary is given in two parts to government employees, in the form of basic pay and allowances.
While the increase in basic pay is calculated on a back-date basis, making employees eligible for arrears, the hike in allowances is applicable from the date the government implements it. As a result, employees are not entitled to arrears in this case.
It is widely believed that the government has effectively saved a lot of money this financial year by not making an announcement on allowances. Government employees, on the other hand, have expressed their disappointment over being denied their full remuneration over a prolonged period.