The Department of Expenditure, under the Ministry of Finance, in a press release, updated the instructions regarding the grant of House Rent Allowance (HRA) to Central Government Employees. The HRA provided to Central Government Employees is calculated on the basis of the pay drawn in the 7th Pay Commission (7th CPC) recommendations, which was accepted by the Government. 


As per the updated rules, a Central Government Employee in certain cases will not be entitled to HRA. According to HRA rules, house rent allowance is admissible with reference to the government servant's "place of duty," regardless of whether the government servant resides there or elsewhere.


A Govt Employee Will Not Be Entitled To HRA:


(i) He/ she shares government accommodation allotted to another government servant; or


(ii) He/she resides in accommodation allotted to his/her parents/ son/ daughter by the central government, state government, an autonomous public undertaking or semi-government organisation such as a municipality, port trust, nationalised banks, Life Insurance Corporation of India, etc; or


(iii) His/ her spouse has been allotted accommodation at the same station by the central government/ state government/ autonomous public undertaking/ semi-government organisation such as municipality, port trust, etc., whether he/she resides in that accommodation or he/she resides separately in accommodation rented by him/her.


However, under the upadated rules, “Government servants other than a government servant who is living in a house owned by him shall be eligible for HRA even if they share government accommodation allotted to other government servants…subject to the condition that they pay rent or contribute towards rent or house or property tax but without reference to the amount actually paid or contributed," the statement read.


HRA Rate And Classification Of Cities:


According to the Memorandum dated 30th December 2022, the following area and HRA rate classifications are permissible:


1. X category (areas with a population of 50 lakhs and above): The admissible rate of HRA as per the 7th CPC is 24 per cent.
2. Y category (areas with a population of 5 lakhs to 50 lakhs): The admissible rate of HRA as per the 7th CPC is 16 per cent.
3. Z category (areas with a population below 5 lakhs): The admissible rate of HRA as per the 7th CPC is 8 per cent.


The classification of cities for the purpose of HRA is based on the population of the area, as per the latest Census report. The Department of Expenditure’s memorandum also noted, “the rates of HRA will be revised to 27 per cent, 18 per cent, 9 per cent for X, Y & Z class cities, respectively, when dearness allowance (DA) crosses 25 per cent and further revised to 30 per cent, 20 per cent and 10 per cent when DA crosses 50 per cent.”


These updated rules will apply to all civilian employees of the Central Government, civilian employees from the Defence Services Estimates, and persons serving in the Indian Audit and Accounts Department.