Why dearness allowance an integral part of pay packet

Thus, it helps in availing maximum benefits of tax deductions, rebates, allowances, and concessions within the accepted bounds under the Income Tax Act of Salary slips not only help in assessing the tax outflow, but also assist in calculating the tds returns and income tax refund. Therefore, it is essential to keep track of the salary break-up to keep up with Income Tax. A salary slip is a legal proof of current employment and the pay scale at which the employee is currently working at.

This document helps in negotiating with prospective employers at an aggregate level i. Almost all companies ask for past payslips as proof of employment and earnings. Also, the employees can compare the offers given by new employers based on past salary slips. It plays a significant role in evaluating the experience. Therefore, salary slip plays an important role in the job search.

It also helps in deciding the hike that one should be getting. Moreover, the salary slip is a deal-breaker in the salary negotiation with a new employer.

Also, previous salary slips can be used to prove the career trajectory. A salary slip has all the details of the salary and designation. It serves as legal proof of the credit paying ability of an employee. Further, availing loans, credit cards, mortgages, and other borrowing are based on the salary slip.

Therefore, this document is required when applying for a loan, credit card, mortgage, etc. Lending institutions and banks ensure they take a copy of the salary slip. The creditworthiness of the borrower is analyzed based on the salary statements.

The salary slip helps in setting a credit limit. Also, it acts as an eligibility criterion to avail of a loan or credit card. With this, salary slip determines your taxes in the financial year as well. The pay slip can be used to avail of certain free services.

In fact, they can also be used to avail services that have a heavy subsidy. Such services include medical care, food grains, etc. The calculator also recommends mutual funds investment ELSS for tax savings. Use the calculator and save the tax. Cost to the Company CTC is the total amount spent by the employer on an employee. The cost to company comprises components such as housing rent allowance hra, Conveyance allowance, Gratuity, Medical expenses, employee provident fund epf, other allowances, etc.

While Gross salary is the amount, an employee receives before any deductions. In other words, it is the amount committed by the employer to the employee every month. Net pay is the salary employee receives after deductions. Cost to company is the amount an employer spends on hiring and sustaining the services of an employee. It is considered to be variable pay. CTC varies based on various factors and thus has an impact on the net salary an employee receives.

An individual can correct it by merely matching the CTC to the actual amount they are receiving. Below is the break of his cost to company :. Gross Salary is the amount before deductions of taxes and others. However, it is inclusive of bonuses, overtime, etc. A pay slip contains a detailed breakdown of employee salary and deductions for a given period. Understanding the pay slip is important as It helps one understand their salary and components Also, the salary slip acts as proof of employment.

It also helps in filing income tax returns and apply for loans and mortgages and negotiate for a salary hike when applying for a new job. The salary slip is important as it helps employees in seeking loans, future employment, income tax planning, availing government subsidies, and acts as a legal document of employment.

The employer provides your salary slip on a monthly basis. A salary slip is either printed or emailed to you by the employer.

The pay slip will have details of your salary and deductions. Last updated November 12, If the amount is above Rs. Education Allowance: Here the employees get an allowance to educate their children in India.

If the amount is more than Rs. Hostel Allowance: It provides you with Rs. You can claim it for a maximum of 2 children. Non-taxable allowances Allowance to Government Employees: Any amount paid for rendering services outside India by the Government. Benefits received by the people working in the UNO. Note: These non-taxable allowances can become taxable allowance if the employee do not use them. Difference between Basic salary and Allowance Basic salary The base income of an employee which is constant and fixed.

Allowance Allowances are an integral part of the salary structure of an employee. Reimbursement When the employer covers the business expenses of the employees. With that, we have come to an end of this post on types of allowances. Share with us your views and opinions in the comment section below.

Alternative Dispute Resolution. Grievance Management. Wages or Salary Indian context. Wages Definition. Minimum wage -. Fair wage -. Living wage -. Pay structure in India. Relevant Factors and Practices. The very concept of D. In the actual determination of the quantum of D. Revision of D. As far as revision of D. The National Commission on Labour2, recommended increase of D. How to Calculate Dearness Allowance?

Beginning 1st of January , the dearness allowance is granted to compensate for price increases to which the revised pay scales relate. This will be reviewed twice a year, on 1st January and 1st July. Foreign Countries Experience.

It is interesting to note that the practice of paying D. However in other countries to meet the demand of the increase cost of living, the real wages themselves are revised to provide for the desired level of standard of living. In Japan cost of living allowance and rent allowance is comprised in the wages. In some countries the wage agreements provided for the increase in wage as a separate component linked with the increase in the price index.

There are different pros and cons of retaining D. Dearness Allowance is a legally enforceable right of State Govt. Read Judgement below.

The 5th Pay Commission was constituted by the West Bengal Government for recommending the revised pay structure of its employees. July 1, , and then fall in line with the Central Government pattern of sanctioning two installments of DA each year.

The Petitioner Confederation moved the Tribunal after the State Government failed to pay the DA in time , as envisaged by the Pay Commission and sought a direction to the State authorities to immediately comply with the report and the recommendations of the 5th Pay Commission Report.

House Rent Allowance. House rent allowance HRA is paid by an employer to the employee to meet expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the employee. Overtime Payment. Working overtime in industry is possibly as old as the industrial revolution. In many companies, overtime is necessary to meet urgent delivery dates, sudden upswings in production schedules, or to give management a degree of flexibility in matching labour capacity to production demands.

The payment of overtime allowance to the factory and workshop employees is guaranteed by law. All employees who are deemed to be workers under the Factories Act or under the Minimum Wages Act are entitled to it at twice the ordinary rate of their wages for the work done in excess of 9 hours on any day or for more than 48 hours in any week.

The major benefit of overtime working to workers is that it offers an increase in income from work. Annual Bonus. The bonus component of the industrial compensation system, though a quite old one, had assumed a statutory status only with the enactment of the Payment of Bonus Act, The Act is applicable to factories and other establishments employing 20 or more employees. Incentive Systems. It is used to signify inducements offered to employees to put forth their best in order to maximise production results.

Incentives are classified as financial and non-financial. Important financial incentives are attractive wages, bonus, dearness allowance, traveling allowance, housing allowance, gratuity, pension, and provident fund contributions.

Some of the non-financial incentives are designation, nature of the job, working conditions, status, privileges, job security, opportunity for advancement and participation in decision making.

However, a vast diversity exists in regard to policy and practice of incentive payments. Incentive systems also have been classified into three groups: individual wage incentive plan, group incentive scheme, and organisation-wide incentive system. The individual wage incentive plan is the extra compensation paid to an individual over a specified amount for his production effort. Individual incentive systems are based upon certain norms established by work measurement techniques such as past performance, bargaining between union and the management, time study, standard data, predetermined elemental times and work sampling.