HRA in the 7th Pay Commission: X, Y and Z city rates

House Rent Allowance (HRA) is the part of a central government employee’s salary that helps meet the cost of rented accommodation, paid as a percentage of basic pay and graded by the class of city the employee is posted in. Under the 7th Pay Commission the rates are 30 per cent for X cities, 20 per cent for Y cities and 10 per cent for Z cities. These are the top rates, and they apply because dearness allowance crossed 50 per cent on 1 January 2026, having first passed the 50 per cent mark on 1 January 2024.

HRA matters to the take-home pay of nearly every serving employee, because almost all of them rent or are deemed to draw the allowance, and because the amount rises in fixed steps as DA climbs. The Department of Expenditure fixed the structure in Office Memorandum 2/5/2017-E.II(B) dated 7 July 2017, which set the starting rates and the two thresholds at which they rise. This page explains the city classification, the DA-linked step rule that took the rates from 24/16/8 to 30/20/10, how the allowance is worked out from the pay matrix , the minimum floor for low pay levels, and the tax treatment under Section 10(13A).

City classification: X, Y and Z

The amount of HRA depends on where the employee is posted, not on where the employee actually lives or how much rent is paid. Cities and towns are grouped into three classes by population, using the Census population figures the Department of Expenditure adopts for the purpose.

Eight cities are classified as X for HRA: Delhi, Mumbai, Kolkata, Chennai, Hyderabad, Bengaluru, Ahmedabad and Pune. A larger list of cities qualifies as Y, and every place not named in the X or Y lists is treated as Z by default. The Department of Expenditure revises the classification when a fresh Census moves a city across a population band, and it issues separate orders that reclassify named cities for HRA on the strength of their urban agglomeration population. An employee posted to an X city draws the X rate even if posted on the outskirts, and the classification follows the place of posting recorded in the office.

The DA-linked step rule

The 7th Pay Commission recommended HRA at 24, 16 and 8 per cent for X, Y and Z cities, a cut from the 30/20/10 the 6th Pay Commission had paid. The government accepted the cut but built in a step rule: the rates rise as dearness allowance increases, on the logic that house rents climb with the same inflation that DA tracks through the All-India Consumer Price Index for Industrial Workers . The rule has two thresholds.

DA reached 50 per cent on 1 January 2024, so HRA moved to its top slab of 30, 20 and 10 per cent from that date and has stayed there as DA has gone on to 60 per cent at 1 January 2026. The rates do not rise any further with DA, because 30/20/10 is the ceiling the 2017 order set. The next change to the HRA structure would come from a new pay commission, not from a higher DA figure, which is why the 8th Pay Commission will decide the question afresh when it reports.

The minimum HRA floor

The 2017 order added a guarantee for employees at the bottom of the pay matrix : HRA shall not be less than Rs 5,400 a month in X cities, Rs 3,600 in Y cities and Rs 1,800 in Z cities. These floor figures equal 30, 20 and 10 per cent of the minimum basic pay of Rs 18,000 at Level 1 . The floor protects a low-level employee whose percentage HRA would otherwise fall below these amounts, and it is the reason a Level 1 employee in an X city draws Rs 5,400 rather than 24 per cent of Rs 18,000 in the years before DA crossed 50 per cent. Now that the rate is 30 per cent, the percentage calculation and the floor coincide at the minimum pay.

How to calculate your HRA

HRA is a flat percentage of basic pay. It is not paid on basic plus DA, and it is not linked to the rent actually paid for the calculation of the allowance itself, only for the income-tax exemption. Read your basic pay from the cell in the pay matrix that matches your pay level and your stage, then apply the rate for your city class.

Take an employee at Level 6, with a basic of Rs 44,900, posted in an X city. HRA at 30 per cent is Rs 13,470 a month. The same employee in a Y city draws 20 per cent, which is Rs 8,980, and in a Z city draws 10 per cent, which is Rs 4,490. An employee at Level 10 with a basic of Rs 56,100 in an X city draws Rs 16,830 a month. The allowance rises automatically each year as the annual increment moves basic pay up the column by about 3 per cent, and it jumps on promotion or on a MACP upgradation that lifts basic pay to a higher cell. HRA forms one part of gross salary alongside DA, transport allowance and the other government allowances that the 7th CPC retained, rationalised or abolished.

Tax treatment under Section 10(13A)

HRA is taxable salary, but a salaried employee who actually pays rent can claim an exemption under Section 10(13A) of the Income Tax Act 1961 , read with Rule 2A. The exemption is the least of three amounts: the actual HRA received, 50 per cent of salary for an employee in Delhi, Mumbai, Kolkata or Chennai and 40 per cent elsewhere, or rent paid in excess of 10 per cent of salary. Salary for this purpose means basic pay plus dearness allowance, plus any commission on turnover, and the calculation is done month by month where the figures change.

The exemption is available only in the old tax regime . The new tax regime , which is the default from FY2023-24, does not allow the HRA exemption or most other allowances, so an employee who opts for or stays in the new regime pays tax on the full HRA. Employees comparing the two regimes have to weigh the HRA and Section 80C deductions they would lose in the new regime against its lower slab rates. For complex situations or large amounts, consult a Chartered Accountant before filing, because tax rules change with each Finance Act and the figures here reflect FY2025-26.

HRA and the 8th Pay Commission

The 8th Pay Commission was constituted on 3 November 2025 with an 18-month mandate, and its report is expected around mid-2027. Until it reports, any change to the 30/20/10 HRA structure, to the city classification, or to the DA-linked step rule is an expectation, not an official figure. A new pay commission usually revisits the percentages and the floor, and the 7th versus 8th Pay Commission comparison sets out which items are confirmed and which are projected. The DA-linked step rule itself resets at a new pay commission, because DA is merged to zero at the changeover and rebuilt from the new index base, so the HRA slab that DA triggers would also restart under the 8th CPC framework.

See also

• 7th Pay Commission
• 7th CPC pay matrix
• Dearness allowance
• Pay Commission in India
• 8th Pay Commission
• 7th versus 8th Pay Commission
• Fitment factor
• Government allowances
• Transport allowance
• Basic pay for government employees
• Pay level
• MACP scheme
• Income tax in India
• Old tax regime
• New tax regime
• Section 80C
• Government employees in India

External references

• Department of Expenditure, Ministry of Finance
• 7th Central Pay Commission report
• Income Tax Department
• Press Information Bureau

References

1. Department of Expenditure Office Memorandum No. 2/5/2017-E.II(B) dated 7 July 2017 (House Rent Allowance to central government employees on implementation of the 7th CPC).
2. Department of Expenditure Office Memorandum revising HRA to 30/20/10 per cent on dearness allowance crossing 50 per cent (effective 1 January 2024).
3. Report of the Seventh Central Pay Commission, November 2015, chapter on House Rent Allowance.
4. Income Tax Act 1961, Section 10(13A) read with Income Tax Rules, Rule 2A.

Last verified: 30 June 2026.