The Ministry of Finance, through two Office Memoranda issued on 21 July 2026, has overhauled the pay structure for federal civil servants. The changes take retrospective effect from 1 July 2026. The new Basic Pay Scales-2026 replace BPS-2022 by absorbing two earlier ad-hoc relief allowances into basic pay, while a fresh 7 percent Ad-hoc Relief Allowance-2026 is layered on top. Separately, the Disparity Reduction Allowance-2026 continues at 15 percent of basic pay for employees already receiving it.

BPS-2026 Absorbs Two Prior Allowances into Basic Pay

The Basic Pay Scales-2026 are built by merging the Ad-hoc Relief Allowance-2022 (15 percent of running basic pay under BPS-2017) and the Ad-hoc Relief Allowance-2025 (10 percent of running basic pay under BPS-2022) into the pay-scale tables. Both predecessor allowances cease to exist from 1 July 2026. The revised scales raise the minimum basic pay across all grades: BPS-1 rises from Rs13,550 to Rs16,280, while BPS-22 starts at Rs146,770 compared with Rs122,190 under BPS-2022. The full schedule of 22 scales, each with 30 stages (14 stages for BPS-20 to BPS-22), is annexed to Office Memorandum No. F.1(2)IMP/2026.

Existing employees have their pay fixed on a point-to-point basis at the stage corresponding to their position above the minimum of BPS-2022 as on 30 June 2026. Anyone drawing personal pay beyond the maximum of their scale continues to receive it at the revised rates. Annual increments remain admissible on 1 December each year under existing conditions.

7% Ad-hoc Relief Allowance-2026 Added

On top of the revised BPS-2026 basic pay, the government has granted an Ad-hoc Relief Allowance-2026 at 7 percent of running basic pay. It applies to federal civil employees, civilians paid from defence estimates, contingent paid staff, and contract employees on standard terms. The allowance is subject to income tax, is admissible during leave, leave preparatory to retirement, and suspension, but does not count towards pension, gratuity, or house rent calculations. Employees posted abroad do not receive it during their foreign posting but regain eligibility upon repatriation. The allowance remains in force until further orders.

Special Pays and Allowances Frozen

All special pays, special allowances, and allowances calculated as a percentage of basic pay: including House Rent Allowance and the allowance equal to one month's basic pay: are frozen at the level admissible on 30 June 2026. The freeze covers federal employees in all ministries, divisions, departments, and offices, including civil employees of the judiciary in BPS-1 to BPS-22. Allowances already subject to a fixed maximum cap are excluded from the freeze.

Disparity Reduction Allowance-2026 at 15 Percent

A separate Office Memorandum, No. 14(2)R-3/2025, grants the Disparity Reduction Allowance-2026 at 15 percent of basic pay as on 30 June 2022. It covers employees in BPS-1 to BPS-22 who were already receiving the Disparity Reduction Allowance under previous orders. The allowance continues on existing terms and conditions with effect from 1 July 2026.

Exercising the Pay-Scale Option

Every affected employee must choose between the old BPS-2022 scheme and the new BPS-2026 scheme. The procedure is as follows:

  • The ministry, division, department, or office that employs the civil servant: or on whose payroll the employee sits: must obtain an irrevocable written option from the employee.
  • The option must be exercised and communicated to the relevant Accounts Office or Drawing and Disbursing Officer within 30 days of the date of issue of the Office Memorandum, i.e. by 20 August 2026.
  • An employee who does not submit an option within the deadline is deemed to have chosen BPS-2026.

Anomaly Committee and Next Steps

The Finance Division (Regulations Wing) will set up an Anomaly Committee to resolve any discrepancies arising from the implementation of BPS-2026. Employees and departments should direct unresolved pay-fixation issues to that committee once it is constituted.

The two Office Memoranda were issued on 21 July 2026: 24 days before this report: which places the notification outside the typical seven-day window for breaking news but makes it the most significant federal pay revision of the current fiscal year. What the evidence does not yet establish is whether provincial governments will adopt matching revisions, how the Anomaly Committee will operate in practice, and whether the conveyance allowance increase reported alongside these measures was notified in a separate circular not yet publicly available on the Finance Division website.