Special Allowance is any Allowance which is given under the following circumstances:
1) To Regularise Salary Structure:
For example: Suppose while recruiting a person for a particular position (say Dy. Manager) the annual CTC agreed upon is 12.00 lacs. Now, giving all allowances, perquisites along with the Salary for Dy. Managers in you Company comes to 11.00 lacs. Now this extra 1.00 lac can be given by way of Special Allowance.
2) To save post retiral benefits:
For example : If the Basic Pay of Employees are increased it has cumulative effect on PF, Gratuity and Leave Pay, so most companies when giving high rise in Salary usually give the rise in Special Allowance to save themselve from paying high retiral benefits and higher contribution to PF, Gratuity and Leave Pay.
Always remember it is easier to change Special Allowance as it can be treated and adjusted on case to case basis, while the same cannot be done for other allowances and perquisities like HRA, Conveyance which are general set on grade/designation wise. So, Special Alllowance is an allowance where if you cannot put a payment under any other hrasd you put it under Special Pay.
3) Others:Special Allowance relating to any court order, legislature or nature of Duty.
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You have said:
|According to my knowledge it will be 5% of Total basic or Rs.40 whichever his higher but still I have some doubt.|
For HRA since there is a Income Tax Benefit by way of rent paid, it is always better to give a substaintial amount under HRA to avail the Tax Benefits.
Following is the salary sheet format you just put up salary in the salary sheet then automatically it will give the break ups.I have also attached salary slip format for your reference.
Salary Sheet Format.xls
sal slip Format .doc
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