City classification for HRA

The classification of cities for house rent allowance places every city and town in India in one of three classes, X, Y or Z, by the population of its urban agglomeration, and the class of an employee’s place of duty sets the house rent allowance rate at 30%, 20% or 10% of basic pay. Eight cities are X, 88 are Y, and every other place is Z by default. The list is the annexure to Department of Expenditure Office Memorandum No. 2/5/2014-E.II(B) dated 21 July 2015, applied from 1 April 2015 and carried forward into the rate order of 7 July 2017.

For a central government employee, the class is the single variable in the allowance. Basic pay comes from the pay matrix cell, the rate comes from the class, and nothing else enters the arithmetic.

Three different city lists circulate around this subject and readers routinely merge them: the eight X cities for HRA, the 19 higher cities for transport allowance, and the metro list used for the income-tax HRA exemption. The three were fixed by three different authorities for three different purposes, and only one of the three overlaps with the HRA list, having done so only since 1 April 2026.

This article carries the population basis, the eight X cities, the full state-by-state Y annexure, the rates and their dearness-allowance trigger, the special dispensation cities, the 8-kilometre and urban-agglomeration extensions, how the three lists differ, what the 2015 order actually changed, and when the classification is next due for revision. For the conditions governing drawal of the allowance and its income-tax exemption, see the house rent allowance article.

Population basis of the three classes

A city’s class is decided by the population of its urban agglomeration as recorded in the latest Census, not by the population inside its municipal-corporation limits. The current classification runs on the final figures of Census 2011.

The urban agglomeration is the unit defined by the Office of the Registrar General and Census Commissioner: a continuous urban spread comprising a core town and its adjoining outgrowths. A suburb inside the agglomeration of an X city therefore takes the X rate even though it has its own municipal body and a population of its own far below 50 lakh. Reading the threshold against municipal-corporation figures instead is the most common arithmetic error on the subject, and it produces the wrong answer in both directions.

The three-letter scheme replaced an older six-grade one. A-1 became X, the A, B-1 and B-2 grades were merged into Y, and the C grade together with unclassified places became Z, the mapping recorded in Office Memorandum No. 2/5/2014-E.II(B) dated 21 July 2015. Older service records and pay bills still carry the retired grades, and an A-1 entry in a 2007 file means the same place as an X entry today.

Z class needs no list. Any city or town not named X or Y in the annexure is Z, so the classification is complete by residue rather than by enumeration. That matters for a posting to a district headquarters or a field unit, where the correct answer is almost always Z at 10% of basic pay, and the absence of the place from the annexure is the proof rather than an omission.

The eight X class cities

Eight urban agglomerations are classified X for house rent allowance, each with a 2011-Census population of 50 lakh and above, and employees posted in them draw 30% of basic pay:

1. Delhi
2. Greater Mumbai
3. Kolkata
4. Chennai
5. Hyderabad
6. Bengaluru
7. Ahmedabad
8. Pune

There is no ninth X city. Surat, Jaipur, Kanpur, Lucknow and Nagpur are Y class for HRA and draw 20% of basic pay, notwithstanding that all five appear on the separate 19-city list that governs the higher rate of transport allowance. Nothing in the 2011 classification treats a state capital, a metropolitan corporation or a high-court seat as a qualifying feature: the only test is the agglomeration population.

Ahmedabad and Pune are the newest entrants, upgraded from Y to X with effect from 1 April 2015 by Office Memorandum No. 2/5/2014-E.II(B) dated 21 July 2015 on their final 2011 Census figures. Before that date an employee posted in Pune drew the Y rate.

The 88 Y class cities, state by state

The annexure to Office Memorandum No. 2/5/2014-E.II(B) dated 21 July 2015 names 88 Y class cities across 21 states and union territories, each an urban agglomeration of 5 lakh or more but under 50 lakh on the 2011 Census. An employee posted at any of them draws house rent allowance at 20% of basic pay.

Uttar Pradesh carries the longest state entry at 15 cities, ahead of Maharashtra at 11 and Kerala at seven. Four states and union territories contribute a single entry each: Assam through Guwahati, Bihar through Patna, Uttarakhand through Dehradun and Puducherry through its own capital. Chandigarh appears as a union territory in its own right.

Four of these Y entries are paid at the higher X rate anyway. Faridabad and Gurgaon in Haryana, and Ghaziabad and Noida in Uttar Pradesh, are Y class on their own population and draw Delhi rates under the special dispensation set out below, which is why they appear in this table and in that one both.

Rates tied to the classes, and the dearness-allowance trigger

House rent allowance is 30%, 20% and 10% of basic pay for X, Y and Z class cities respectively, with monthly floors of Rs. 5,400, Rs. 3,600 and Rs. 1,800, under Department of Expenditure Office Memorandum No. 2/5/2017-E.II(B) dated 7 July 2017. These rates have been in force since 1 January 2024.

That order fixed the rates at 24%, 16% and 8% from 1 July 2017, below the 6th CPC rates, on the reasoning that the 2.57 fitment factor had already lifted basic pay. Paragraph 2 of the same order then pre-authorised two step-ups: to 27%, 18% and 9% when dearness allowance crosses 25%, and to 30%, 20% and 10% when it crosses 50%. Dearness allowance reached 28% from 1 July 2021 and 50% from 1 January 2024, so both step-ups have taken effect. Because both were written into the 2017 order, neither needed a fresh rate order and departments acted on the dearness allowance notification alone.

Dearness allowance is now 60%. The 2017 order provides for no step-up above the 50% trigger, so the rates sit at their ceiling and a further rise in dearness allowance moves the HRA percentage no further.

The base is basic pay alone. No dearness allowance is added to it, which separates HRA from transport allowance, where the slab carries dearness allowance on top. Computing 30% of basic pay plus dearness allowance rather than 30% of basic pay overstates the allowance by the full dearness allowance percentage, an error worth more than half the correct figure at the current rate.

The floors bind only at the bottom of the pay matrix. At Level 1 cell 1, basic pay of Rs. 18,000 gives 30% of Rs. 5,400, which equals the X floor exactly; the two coincide by design rather than by coincidence, since the floors were set against the Level 1 entry cell.

Place of duty, the urban agglomeration and the 8-kilometre rule

House rent allowance follows the office, not the home. Paragraph 3.1 of Department of Expenditure Office Memorandum No. 2/4/2022-E.II(B) dated 30 December 2022, the master order consolidating the conditions, states that HRA is admissible with reference to the place of duty of the government servant, irrespective of whether the servant resides at that place or any other place. An employee posted in Delhi who commutes daily from an unclassified town in Haryana draws the Delhi X rate of 30%; an employee posted in that town who rents a flat in Delhi draws the Z rate of 10%.

Two provisions of the same order widen the area that qualifies for a classified city’s rate. Paragraph 3.4(iv) pays the city’s rate to employees serving anywhere within its urban agglomeration, which is what carries the rate out to the suburbs of an X city without any separate sanction. Paragraph 3.4 covers establishments outside any agglomeration: staff working in central government establishments within 8 kilometres of the periphery of the municipal limits of a qualified city draw that city’s rate, on a dependency certificate from the Collector or the Deputy Commissioner, sanctioned initially for three years and extended thereafter by the administrative ministry in consultation with its Financial Adviser.

The two are not alternatives. The 8-kilometre concession is reserved for places that fall outside every urban agglomeration, so an office already inside an agglomeration takes the rate under paragraph 3.4(iv) and needs no dependency certificate at all.

Transfer moves the rate with the posting. An employee transferred from Bengaluru to Mysore drops from 30% to 20% of basic pay from the date of joining at Mysore, subject to the Y floor of Rs. 3,600 a month, and the classification carries no protection of the higher rate. The take-home salary effect of such a transfer is often larger than the transfer grant that accompanies it.

Cities drawing a higher class by special dispensation

Nine places draw house rent allowance at a higher class than their own population would give, under standing special orders continued by paragraph 6 of Office Memorandum No. 2/5/2017-E.II(B) dated 7 July 2017 read with Office Memorandum No. 2/2/2016-E.II(B) dated 3 February 2017. The dispensations run until further orders.

The rationale in each case is parity with an adjoining or dependent station rather than population. The four National Capital Region towns hold Delhi rates because the housing market they draw on is the Delhi market; Panchkula and Mohali hold Chandigarh rates for the same reason; and Shillong, Goa and Port Blair hold Y rates as a standing concession for high-cost stations that the population test would place in Z.

Office Memorandum No. 2/5/2014-E.II(B) dated 21 July 2015 expressly continued these dispensations while the 7th Central Pay Commission recommendations were under consideration, and the 2017 order then carried them forward. No later order has withdrawn any of them.

Why the HRA list is not the transport allowance list

The house rent allowance classification and the transport allowance city list are different lists, made by different orders, and confusing them is the single most common error on the subject. Transport allowance uses 19 cities, fixed in the annexure to Department of Expenditure Office Memorandum No. 21/5/2017-E.II(B) dated 7 July 2017: Hyderabad, Patna, Delhi, Ahmadabad, Surat, Bengaluru, Kochi, Kozhikode, Indore, Greater Mumbai, Nagpur, Pune, Jaipur, Chennai, Coimbatore, Ghaziabad, Kanpur, Lucknow and Kolkata.

The overlap is exactly the eight X cities. The other eleven, Patna, Surat, Kochi, Kozhikode, Indore, Nagpur, Jaipur, Coimbatore, Ghaziabad, Kanpur and Lucknow, draw the higher transport allowance but only Y class house rent allowance at 20% of basic pay. An employee at Level 9 posted in Lucknow therefore receives Rs. 7,200 a month plus dearness allowance as transport allowance, the same figure as a colleague in Delhi, and 20% of basic pay as HRA against that colleague’s 30%.

Ghaziabad is the place where every distinction meets at once. It is Y class on population, draws Delhi X rates by special dispensation, and sits on the 19-city transport list in its own right.

Why the income-tax metro list is a third list, and why that changed in 2026

The metro list used for the income-tax exemption of house rent allowance was a third and separate list until 1 April 2026, and from that date it matches the eight X class cities. This is a change in the tax rule, not in the pay classification, and it affects only the computation of the exemption.

Under Section 10(13A) of the Income-tax Act, 1961 read with Rule 2A, the third limb of the HRA exemption is 50% of salary where the rented home is in a metro and 40% elsewhere, and the metro list held four cities for decades: Delhi, Mumbai, Kolkata and Chennai. Bengaluru, Hyderabad, Pune and Ahmedabad were X class for the allowance and non-metro for the exemption at the same time.

Rule 279 of the Income-tax Rules, 2026, notified on 20 March 2026 by Notification No. 22/2026, G.S.R. 198(E), prescribes the limits at serial number 11 of the table in Schedule III to the Income-tax Act 2025 and names eight cities for the 50% limb, adding those four. The pay list and the tax list are the same eight from 1 April 2026, assessed in assessment year 2027-28. Returns for the financial year 2025-26 filed during 2026 continue on the four-city list under Rule 2A.

The change alters little for a central government employee, because the third limb almost never binds. House rent allowance is at most 30% of basic pay, while the 40% limb works out to 40% of basic pay plus dearness allowance, which at a dearness allowance of 60% is well above 60% of basic pay. The exemption is therefore decided by the lesser of the actual allowance and the rent paid over 10% of salary, and the metro question is moot. The exemption is also available only under the old tax regime.

What the 21 July 2015 order changed

Office Memorandum No. 2/5/2014-E.II(B) dated 21 July 2015 applied the final population figures of Census 2011 to the classification with effect from 1 April 2015, and it moved 23 cities. Two rose from Y to X, Ahmedabad and Pune, taking the X class to eight. Twenty-one rose from Z to Y.

The same order withdrew a protection. Ajmer in Rajasthan and Durgapur in West Bengal had been holding a classification above what their population supported; the 2011 figures placed both on the ordinary list, and the order withdrew the protected status accordingly. Both appear in the Y annexure today on their own population.

The transport allowance list moved in the same exercise, from 13 higher cities to 19, as Patna, Kochi, Kozhikode, Indore, Coimbatore and Ghaziabad crossed the qualifying bracket. That the two lists were revised together on the same Census is part of why they are so often taken for one list.

The 7th Central Pay Commission left the three-class structure alone. Office Memorandum No. 2/5/2017-E.II(B) dated 7 July 2017 changed the percentages and reproduced the 2015 classification as its annexure without altering a single entry, so the operative city list has stood unchanged since 1 April 2015.

When the classification is next due for revision

The classification is revised when fresh Census urban-agglomeration figures become available, so the next revision follows Census 2027. The Government notified its intent to conduct the census in the Gazette of India on 16 June 2025 under the Census Act, 1948, fixing 00:00 hours on 1 March 2027 as the reference date for all states and union territories except Ladakh and the snow-bound non-synchronous areas of Jammu and Kashmir, Himachal Pradesh and Uttarakhand, where the reference date is 00:00 hours on 1 October 2026.

A Census reference date is not a reclassification date. The 2011 Census had a reference date of 1 March 2011, and the Department of Expenditure applied its final figures to house rent allowance from 1 April 2015, four years later, once the urban-agglomeration tables were published and the order was issued. The 2011 classification stays in force until a fresh order issues on the 2027 figures.

The 8th Central Pay Commission is a separate question and has decided nothing. It was constituted by Department of Expenditure Resolution F. No. 01-01/2025-E.III(A) dated 3 November 2025 with 18 months to report, expiring on 3 May 2027, and has submitted no report and no interim report. Its terms of reference carry no direction on the city classification, and the 7th CPC precedent is that a pay commission revises the percentages and leaves the three-class structure and the population thresholds where they are. Any figure circulating for 8th CPC HRA rates is speculation.

Worked examples

House rent allowance is the pay-matrix cell multiplied by the class rate, subject to the class floor, with no dearness allowance in the arithmetic. At the current 30%, 20% and 10%:

At Level 1 the percentage and the floor produce the same figure in all three classes, which is what the floors were calibrated to. The floors bind above Level 1 only where a class rate falls below them, and at Level 6 and above they never do.

The gap between classes widens with the level rather than with the city. A Level 13 officer moving from Chennai to Coimbatore loses Rs. 12,310 a month in allowance, while a Level 6 employee making the same move loses Rs. 3,540, on identical rates and an identical reclassification.

To run a particular level, cell and city, the HRA calculator and the 7th CPC salary calculator apply the class rate and the floor.

Common errors

• Treating the eight-city HRA X list and the 19-city transport list as one list. They are separate annexures to separate orders of the same date, and a Lucknow, Surat, Jaipur, Kanpur, Nagpur, Patna, Kochi, Kozhikode, Indore, Coimbatore or Ghaziabad posting gets the higher transport allowance with Y class HRA.
• Applying the pre-2026 four-city income-tax metro list to the allowance. The tax list governs the exemption under Rule 279 of the Income-tax Rules, 2026, not the rate at which the allowance is paid.
• Quoting the 2017 base rates of 24%, 16% and 8% as current. With dearness allowance above 50%, the rates have been 30%, 20% and 10% since 1 January 2024.
• Reading population as municipal-corporation limits. Classification runs on the urban-agglomeration figure of the Registrar General, so a suburb inside an X city’s agglomeration takes the X rate.
• Computing HRA on basic pay plus dearness allowance. The base is basic pay alone.
• Using the place of residence rather than the place of duty, contrary to paragraph 3.1 of the master order of 30 December 2022.
• Assuming a place absent from the annexure has been left unclassified. Every place not named X or Y is Z at 10% of basic pay.
• Treating Faridabad, Ghaziabad, NOIDA or Gurgaon as X class cities. All four are Y on population and draw Delhi rates by a dispensation that runs until further orders.

Related Articles

• House rent allowance
• HRA exemption under Section 10(13A)
• Transport allowance
• Dearness allowance
• Dearness relief
• 7th Central Pay Commission
• 8th Central Pay Commission
• Pay matrix
• Minimum pay
• Fitment factor
• CCS (Revised Pay) Rules, 2016
• Take-home salary for central government employees
• Income tax for government employees
• Income-tax Act 2025
• Standard deduction
• Section 80GG
• Composite transfer grant
• Government accommodation
• Department of Expenditure
• Department of Personnel and Training
• Central government employees in India
• Central government holidays 2027
• HRA calculator
• HRA exemption calculator
• Transport allowance calculator
• 7th CPC salary calculator

External references

• Department of Expenditure, orders and circulars
• Department of Expenditure, HRA and cities classification
• Census of India, urban agglomerations
• Office of the Registrar General and Census Commissioner, India
• The Gazette of India
• Income Tax Department, notifications

References

1. Ministry of Finance, Department of Expenditure, Office Memorandum No. 2/5/2014-E.II(B), dated 21 July 2015, re-classification and upgradation of cities and towns on the basis of Census-2011 for the grant of house rent allowance, with effect from 1 April 2015, and the annexure of X and Y class cities.
2. Ministry of Finance, Department of Expenditure, Office Memorandum No. 2/5/2017-E.II(B), dated 7 July 2017, house rent allowance under the 7th CPC: rates of 24%, 16% and 8%, floors of Rs. 5,400, Rs. 3,600 and Rs. 1,800, the paragraph 2 escalation to 27/18/9 and 30/20/10 as dearness allowance crosses 25% and 50%, and paragraph 6 continuing the special dispensations.
3. Ministry of Finance, Department of Expenditure, Office Memorandum No. 2/4/2022-E.II(B), dated 30 December 2022, consolidating the conditions for house rent allowance, including paragraph 3.1 on the place of duty and paragraphs 3.4 and 3.4(iv) on the 8-kilometre concession and the urban agglomeration.
4. Ministry of Finance, Department of Expenditure, Office Memorandum No. 2/2/2016-E.II(B), dated 3 February 2017, continuing the special dispensation rates for Faridabad, Ghaziabad, NOIDA, Gurgaon, Panchkula, S.A.S. Nagar (Mohali) and Jalandhar Cantonment.
5. Ministry of Finance, Department of Expenditure, Office Memorandum No. 21/5/2017-E.II(B), dated 7 July 2017, transport allowance and the annexure of 19 higher-rate cities, cited to distinguish the two lists.
6. Report of the Seventh Central Pay Commission (submitted 19 November 2015), chapter on house rent allowance and the classification of cities.
7. Central Board of Direct Taxes, Notification No. 22/2026 [F. No. 370142/41/2025-TPL], G.S.R. 198(E), dated 20 March 2026, notifying the Income-tax Rules, 2026, Rule 279 of which prescribes the eight cities for the 50% limb of the house rent allowance exemption at serial number 11 of the table in Schedule III to the Income-tax Act 2025.
8. Ministry of Home Affairs, Office of the Registrar General and Census Commissioner, Gazette of India notification dated 16 June 2025 under the Census Act, 1948, fixing 1 March 2027 as the reference date for Census 2027 and 1 October 2026 for Ladakh and the snow-bound non-synchronous areas of Jammu and Kashmir, Himachal Pradesh and Uttarakhand.
9. Ministry of Finance, Department of Expenditure, Resolution F. No. 01-01/2025-E.III(A), dated 3 November 2025, constituting the Eighth Central Pay Commission with 18 months to report.
10. Census of India 2011, urban-agglomeration population tables, Office of the Registrar General and Census Commissioner, India.