HRA Increase with DA: Union Cabinet announces double benefits, How much HRA can be?

Union cabinet announced hike in DA on 14 Jul 2021. DA is increased from 17% to 28%. If HRA increases, it will add to central government employees pockets. 48 Lakh employees will be benefitted from this move.

There is rule according to which there will be increase in HRA with increase in DA.

What are current HRA rates?

Presently Central govt employees who are posted in X-class cities are getting HRA at the rate of 24% of their basic pay. In Y-class cities, the rate is 16% and for employees staying in Z-class cities are drawing HRA at 9% of their basic. After increase in DA, now fresh rates would be 27%(X-cities), 18%(Y-cities) and 9%(Z-cities).

What does rule says?

Rule of finance ministry for HRA says that HRA will be increased with the increase in DA. When DA will increase by 25%, then HRA will increase to 9%, 18% and 28%. If DA reaches 50% mark, HRA will hike to 10%, 20% and 30%. The recent increase in DA has crossed 25% mark and hence HRA is bound to hike by rule.

Classifications of Cities?

How cities are classified is again remains a mammoth task to understand. Our team has tried to simplify it. The cities are classified on basis of population as explained

X-Category: Cities which has population above 50 Lakhs are classified into X-cities. There are total 8 cities in X-class which are Delhi, Mumbai, Kolkata, Chennai, Pune, Ahmedabad, Hyderabad and Bengaluru. In 2017, Finance ministry issued directive stating that Faridabad, Gajiabad, Noida and Gurugram will also be categories as X-class cities.

Y-Category: Cities which has population between 5 Lakhs to 50 Lakh are categorized as Y-class cities. There are total 90 cites in Y-class cities.

Z-Category: Cities which has population less than 5 Lakhs are categorized in Z-class cities.

HRA is applicable only oh basic pay

According to Finance Ministry, HRA is given only on basic pay. An employee draws HRA according to the rates only on basic pay. HRA is not calculated on other pays like non practicing allowance, Military Service pay or any other pay.

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