Regarding dearness allowance

MAHESH (Querist) 18 August 2018 This query is : Open
Hello,
For calculation of DA as percentage of basic, government has some procedure. I understand that dearness allowance is not mandatory for publicly listed company such as Reliance industries or Tata Motors, etc.
However, If the publicly listed company decides to pay DA, can it do calculations for DA on its own or it has to follow government guidelines?
Thanks!

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kavksatyanarayana (Expert) 18 August 2018
The DA will be given as per company rules but not government rules.

MAHESH (Querist) 19 August 2018
More opinions please. Any example where company provides such DA. Is there any benefit for company if it provides DA.

P. Venu (Expert) 19 August 2018
What are the facts? What is the real issue?

MAHESH (Querist) 19 August 2018
Dear Venu ji,
As per income tax law, 10% of basic and DA can be contributed towards NPS by employer which is fully tax free with no ceiling (u/s 80CCD(2)). However, if a company does not have DA component in employee's salary slip, then it can contribute only 10% of basic towards NPS (as there is no DA). I would like to propose to our HR, that if they re-brand/rename 'supplementary allowance' as 'Dearness Allowance', then it would allow more contribution for NPS. It would benefit everyone in the company.

Hence the query.
Thanks!

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