Dearness allowance
Amit
(Querist) 29 September 2011
This query is : Resolved
Sr,
I have following queries:
1) Is Dearness allowance is compulsory for Private companies?
2) If a private company pays DA does it get any exemption for Income tax deduction.
Thanks,
Regards,
Amit
R.Ramachandran
(Expert) 29 September 2011
There is no such compulsion on private company to pay Dearness Allowance. It is its own policy decision keeping in view the man power availability and also its best HR policies.
Whenever DA is paid by the company, the same being part of its expenses, it can account for the same as its expenses and only the profit will get taxed. Therefore, apart from treating the DA as the company's business expenditure, there is no other Income Tax Exemption.
Guest
(Expert) 29 September 2011
The constituents of package allowed to employees is at the sole discretion of the company. How to or with what name to compensate the employees for the elements of increase in cost of living solely depends upon the copany.
Further, if dearness allowance is allowed to the employees that forms part and parcel of the wages/salary whatever you call in the name. So, that automatically falls within the scope of business expenses cum operation expenses of the company, as employee wages that reduces the profits of the company, as has already been pointed out by Shri ramachandran.
However, the income on account of Dearness allowance in the hands of employees forms part of income to be taxed at the hands of the employee as per the prescribed rates.
prabhakar singh
(Expert) 29 September 2011
1) Is Dearness allowance is compulsory for Private companies?
Answer: No,every private or public limited company has liberty to formulate its own policy,regarding its pay packages for its employees as there is no enactment binding them to pay as DA as compulsion.
2)Just like salary ,DA,or any every else paid to employee by the company ,is its expenditure deductible as expenditure from its gross profit to arrive at its net profit,so in actual effect neither any DEDUCTION NOR ANY EXEMPTION IS AVAILABLE TO
the company on this score.
Sailesh Kumar Shah
(Expert) 29 September 2011
All experts has left no room to say. Perfectly elaborately by them.
Amit
(Querist) 04 October 2011
Dear all,
Thank you very much for your speedy expert advise.
Regards,
Amit
