7Th Pay Commission House Rent Allowance (HRA)

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For the employees of the Indian Central Government, House Rent Allowance (HRA) is a crucial element of the salary of any employee. The Central Government of India gives its staff a particular portion of wages to take care of housing rental costs. As per the suggestions of the 6th Pay Commission, this HRA component of the salary was slotted as 10% of the basic salary for employees working in cities other than their residential cities. However, the next, and that which stands now, the 7th Pay Commission, recommends a different portion of the basic pay for staff living in different grades of cities like X cities in India, Y cities, and Z cities.  

HRA Based on X Cities in India, Y Cities, and Z Cities 

The entitlement of HRA as a component of the employee’s basic pay is administered based on the city in which the employee works. For the purpose of the correct administration and delivery of HRA, the Central Government has categorised cities and towns into three groups. These are comprised of the letters X, Y, and Z. Nonetheless, how does the Central Government determine the categorisation of cities into different classes? This is explained below:  

  • X Cities: If a city in which the employee works has more than a population of 50 lakh, the city is an “X” city. 
  • Y Cities: If a city in which the employee works has a population that ranges from 5 – 50 lakh, the city is termed a “Y” city. 
  • Z Cities: If a city in which the employee works has a population of under 5 lakh, it is called a “Z” city.  

Additionally, in 2017, the Central Government made some changes to the regulations of HRA for central govt employees. Based on the mandates of the 7th Pay Commission, the changes and entitlements stated that the HRA would rise with Dearness Allowance. That is, if the Dearness Allowance was over 25% of an employee’s pay, then the HRA would increase per this.  

HRA Rates – City-wise Classification 

As per the regulations and recommendations of the 7th Pay Commission, the HRA rates for Central Government employees based on X cities in India, Y cities in India, and Z cities in India are as follows:  

  • X Category Cities – 24% of basic salary 
  • Y Category Cities – 16% of basic salary 
  • Z Category Cities – 8% of basic salary 

Recent Reports and Updates on the HRA  

Recent reports have suggested that the HRA for employees in X cities is paid at 27% of the basic pay of the employee. For those employees working in Y cities and Z cities, the HRA is reported to have increased to 18%, and 9%, respectively. In early 2023, the DA or Dearness Allowance was increased to account for inflationary costs, and given this, the HRA is touted to rise once again.  

Additional Read: 7th Pay Commission Allowances & Pay Scales PBOR of Armed Forces

HRA for Central Government Employees – Key Takeaways 

The 7th Pay Commission, executed by the Indian government, has brought relevant changes and modifications within the bounds of different allowances, and HRA or House Rent Allowance is one area where changes have been made. Here are some key points related to the HRA changes made in the Pay Commission: 

  • HRA Rates Revision: The 7th Pay Commission has revised the rates of HRA for Central Government employees. The HRA rates vary according to the city of work and residence and are classified into three classes – X, Y, and Z. 
  • City Classification: Cities are segregated into X cities in India, Y cities in India, and Z cities in India, based mainly on their population. In the X category of cities, metros and large cities are included. In the Y category of cities, small cities are included. The Z category includes towns. It is noteworthy that some metro city employees may receive a higher rate of HRA due to the high costs of living in these big cities.  
  • North East Region HRA Rates: Employees who work in the North East region of India receive a special HRA given the challenges involved in residing in such areas.  
  • Taxation and HRA: HRA forms a part of the salary of an employee and is liable for income tax. Nonetheless, under Section 10(13A) of the Income Tax Act, employees may claim exemptions.  
  • Conditions of HRA: If employees want to be eligible for HRA, they should be living in accommodation of a rental nature. In case they reside in their own homes, they may not be eligible for the perk of HRA.  

Final Words on HRA and the 7th Pay Commission 

For any Central Government employee, it is vital to be updated about any revisions in all aspects of the salary of the employee as notified by the Pay Commission. The government is always issuing notifications on revisions and it is possible to keep yourself in the know about these as they benefit you if you are a government employee. Rules and regulations on rates may impact your basic salary structure and your overall financial planning.  

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing. This content is for educational purposes only. 

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