X Y Z Classification of Cities for HRA

Revised HRA Rates from July 2023: The Railway Ministry has received a memorandum from IRTSA, urging the Secretary of Expenditure to review and adjust the rates for X, Y, and Z class cities to 27%, 18%, and 9% respectively. This adjustment should take effect starting from January 1st, 2021, as the rates of DA have surpassed 25%.

One of the significant components of Central Government employees’ salaries is the House Rent Allowance (HRA). It serves to provide compensation for rental housing expenditures, with a certain percentage of the basic salary being made available to all Central Government employees. The HRA rates are divided into three categories, namely Z Class, Y Class, and X Class, with revised percentages of 9%, 18%, and 27%, respectively, that took effect from July 1, 2021.

The Central Government personnel are expected to have the revised HRA rates in effect starting from January 1, 2021. Various employee unions are requesting the implementation of these revised rates from the same date.

How to calculate HRA in salary?

Most organizations, including both government and private sectors, allocate a specific portion of an employee’s basic salary to cover housing expenses. The percentage of Housing Rent Allowance (HRA) is determined according to the categorization of various cities and towns. The HRA value is derived based on an employee’s basic salary, such as when an individual receives Rs. 49000 as their basic salary, the HRA amount is calculated using the following percentages: 27% of basic salary which equals to Rs. 13230, 18% of basic salary which equals to Rs. 8820, or 9% of basic salary which equals to Rs. 4410.

HRA Hike for Central Government Employees

28% DA Hike Impact On The Rate of HRA for CG Employees: On August 18, 2021, orders were issued to revise the House Rent Allowance (HRA) rates for cities in X Class, Y Class, and Z Class. The new rates are set at 27%, 18%, and 9%, respectively, and were effective as of July 1, 2021.

HRA Increase Order July 2021

The House Rent Allowance (HRA) will be revised for Central Government employees from 1st July 2021

Following the Cabinet’s approval, the existing rate of 17% for DA has been increased by 11% resulting in a new cumulative DA of 28% effective from 1st July 2021. This increase in DA is also affecting the rate of HRA. According to the 7th pay commission report, HRA rates for X, Y and Z class cities will be adjusted to 27%, 18% and 9% respectively when DA crosses 25%, and later adjusted to 30%, 20% and 10% respectively when DA crosses 50%.

Will HRA be revised to 27%, 18%, and 9% from July 2021?

As of July 2021, all groups of Central Government employees will see adjustments made to their HRA percentages with revised rates of 27%, 18%, and 9% being implemented.

Benefits of House Rent Allowance

• A big relief on the expenditure of rented house
• If DA crosses 25% and 50%, HRA will increase!
• If the basic salary increases, HRA will increase!

New Rates of HRA from July 2021

• X Class Cities: 27 percent of Basic Pay
• Y Class Cities: 18 percent of Basic Pay
• Z Class Cities: 9 percent of Basic Pay

7th CPC House Rent Allowance for Central Government Employees

The 6th CPC recommended 10 percent of basic salary (Pay) for the employees working in other cities. And now the 7th pay commission recommended 8% of matrix pay for other cities. But the minimum amount of HRA is Rs. 1,800 (The minimum basic pay is Rs. 18,000 and the minimum HRA is equal to 10%).

The Government of India issued an important order regarding the rates and entitlements of House Rent Allowance for Central Government employees on 7.7.2017 as per the decision on the 7th pay commission report. The new revised rates (percentage) of HRA as per city classification with effect from 1st July 2017 as follows…

• X Class Cities: 24 percent of Basic Pay
• Y Class Cities: 16 percent of Basic Pay
• Z Class Cities: 8 percent of Basic Pay

Indian cities are classified according to the population for the purpose of House Rent Allowance (HRA) to Central Government Employees:

• X Class Cities (Above 50 Lakh Population): 24% of Basic Salary
• Y Class Cities (5 to 50 Lakh Population): 16% of Basic Salary
• Z Class Cities (Below 5 Lakh Population): 8% of Basic Salary

Minimum HRA Rs. 1,800 at the rate of 10%

The revised rates of HRA will not be less than Rs.5400 for X Class cities, Rs. 3600 for Y Class cities and Rs. 1800 for Z class cities. The below table denotes the minimum amount of HRA for pay level 1, pay level 2, and pay level 3.

HRA Calculation with minimum pay of all levels in Pay Matrix

More than 7 lakh employees are benefiting due to the enhancement of minimum HRA and the table shows the basic pay in pay level 1, pay level 2, and pay level 3.

7th Pay Commission New HRA Table

HRA for Pay Level 1

HRA for Pay Level 2

HRA for Pay Level 3

HRA will be revised to 30%, 20% & 10%

The rates of HRA will be revised to 27%, 18%, and 9% for X, Y & Z class cities respectively when Dearness Allowance (DA) crosses 25 percent and further revised to 30%, 20%, and 10% when DA crosses 50%.

Double HRA Rules for Central Government Employees

The House Rent Allowance is admissible with reference to the place of office or duty. And it is not referenced with the residence of the employee.

House Rent Allowance (HRA) is compensation for expenses in connection with the rent of the residential accommodation to be hired or leased by the employee and is graded based on the level of the employee.

Classification of Cities for HRA after 7th Pay Commission

Indian cities are classified as three categories (X Cities, Y Cities, and Z Cities) for the purpose of House Rent Allowance as per the population record. The ‘X’ Class and ‘Y” Class cities and towns are denoted in the below table as State-wise and the other cities are under ‘Z’ Class.

State-wise List of X Y Z Class Cities in India