Important allowances in the salary

Important allowances in the salary

What is a salary allowance

A salary allowance is a monetary benefit given to an employee to cover certain expenses incurred during employment. It may be paid as a flat rate (fixed monthly), or it may be calculated on a percentage basis (e.g., mileage allowance). In either case, there must be a clear link between the expense and the performance of duties for which you receive the allowance.

Special allowance: The special allowance in salary is an allowance paid to employees who have been promoted and placed in a higher grade. It is given to recognize the additional responsibilities, duties, and skills required in the new position. This type of allowance may be paid at the beginning of each month or on a pro-rata basis from the date of promotion. It is only partially taxable.

Entertainment Allowance: The Entertainment allowance is reimbursement for business entertainment expenses. It is used to reimburse employees for the cost of business meals and entertainment, including tickets, refreshments and facility rentals.

Fixed Medical Allowance: when an employee or any of family members fall sick, they are eligible for a fixed medical allowance. The amount varies from a few hundred rupees to thousands of rupees. The amount depends on the company policy and can be based on annual or monthly salary. This type of allowance is only partially taxable.

Dearness allowance: This effectively refers to the allowance for the cost of living. It is paid to the employees in addition to their basic pay. It is payable by the employer to employees, other than managerial staff, who are eligible for payment of Dearness Allowance. Dearness Allowance is paid because of price rise or inflation and it varies from time to time depending upon the prevailing prices of items and services.

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HRA: House Rent Allowance is another kind of allowance that is paid by the government to its employees who are posted in different places. It is given to them so that they can rent a house or an apartment where they can live with their family comfortably.

Transport Allowance: Transport Allowance is also known as TTA which means Traveling Allowance. This type of allowance helps the employee to travel from his home place to the office and vice versa at regular intervals without any cost on his part.

City Compensatory Allowance (CCA): This is a sum of money paid to employees who are posted in cities with a high cost of living. The purpose of this allowance is to compensate them for the extra expenses they have to incur due to higher prices in these cities.

For example, if you are posted in Mumbai and your family lives in Pune, you can get CCA as compensation for the extra expenses incurred by your family on account of staying in Mumbai. However, this is not applicable if you and your family live together in Mumbai itself. The amount varies according to different cities.

.Learning about allowances in salary slips is often ignored especially by fresh joinees they are more involved in learning about things like the pf name correction form or the bonuses. Check out this page for more info. Hopefully this article has helped you understand allowances better so you can read your salary slip better and negotiate properly in future job interviews.

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