Understanding City Compensatory Allowance: Limits, Calculation, and Relation to Dearness Allowance?

Hi,

I have a few questions regarding the City Compensatory Allowance:

1. Is there a limit or a percentage for the CCA in metros and other cities?
2. If there are no limits, what should be the way to calculate the CCA?
3. If Dearness Allowance is being paid, should the CCA also be paid, or is only one of them sufficient?

Hoping for prompt replies.

Thank you,
Jaiwardhan Singh

City Compensatory Allowance is paid to compensate for the cost of living in the city. Dearness Allowance is also a kind of compensation, but it takes into account the general cost of living, which is definitely variable according to the grades of the city.

Normally, CCA will be equal for all employees, ranging from the Manager to the Sweeper, barring some exceptions where companies may have different CCAs for different categories of employees. That is why CCA is not calculated as a percentage of Basic but paid as a fixed amount, whereas DA (except Industrial Variable DA) is paid as a percentage of Basic Salary.

The amount of CCA to be paid depends on the company's policy, and there is no legislative ruling in this regard except for taxability.

Regards,

Madhu.T.K

Hi Madhu,

Thank you for this information. I would like to know if this allowance is taxable. If not, what is the maximum limit?

I have read many of your postings. It's always very organized and informative.

Regards,
Shikha

I regret to say that I do not have any ready-made information about the amount of CCA throughout India. It is purely a matter dependent on the company's policy regarding the categorization of cities. As a result, two different companies may have two different CCAs for employees posted in the same city.

Regards,
Madhu.T.K

Hi Mr. Madhu,

I want to know, if the CCA is equal to DA, so PF is applicable on that, and what is the maximum limit of the same.

Regards,

CCA is DA. Both are different items. When DA reflects the actual cost of living index, the CCA need not necessarily change according to CPI. Normally, it will be fixed, and it is given to 'compensate' for additional expenses (only to an extent) involved in city life. Therefore, it will not attract PF.

Regards, Madhu.T.K