Understanding VDA vs. Special Allowance: Can You Explain the Key Differences?

Understanding VDA and Special Allowance

What is the basic difference between VDA (Variable Dearness Allowance) and Special Allowance?

Regards,
Rahul Vaidya

Understanding VDA and Special Allowance

VDA or Variable Dearness Allowance is a payment (part of the total wage) that varies with some Consumer Price Index (whatever the series) compiled by the Government of India (if I am right, by the National Sample Survey). Special Allowance is in the nature of a Dearness Allowance only but is a term used in the Minimum Wages Act. This Special Allowance is statutorily a part of the Minimum Wage under the act and is linked to a particular series also stated under the said act. Because of the different series of Cost of Living/Consumer Price Index and different linkages, these may vary at different rates but in essence, these are identical, being in the nature of a "payment to neutralize the rising costs." Without going into the technicalities of the matter, I suppose this explanation would be adequate!

Regards,
Samvedan
November 20, 2011

Agreed with Samvedan. In addition to it, VDA is calculated based on the India-wide average consumer price index. This is done every January and July. For more details, please visit labour.nic.in.

As far as knowledge is concerned, special allowances are the same as other allowances such as HRA, Cony., Educational Cess, Medical Incentives, and various other allowances. DA/VDA depends on the variation of the consumer index and is defined by the state government from time to time under the Minimum Wages Act.

Thanks and regards,

Sumit Kumar Saxena

Difference Between DA & VDA

The difference between DA & VDA is explained here. Special allowance is the residual amount of your CTC after adjusting Basic, DA, HRA, and other tax-saving components. I don't think the Minimum Wages Act prescribes anything about special allowance.

Pon

https://www.citehr.com/33995-differe...a-ida-vda.html

Understanding the Difference Between VDA and Special Allowance

VDA is a part of the gross wage, whereas the Special Allowance (SPL) is excluded from the total wage. For example, washing allowance and medical allowance are considered special allowances.

Regards,
Deepak

Kindly check out the provisions of the Minimum Wages Act. What I referred to as "Special Allowance" is a sanctified and variable component of the Statutory Minimum Wage. Further, CTC has NO statutory recognition/sanctification. It is a tool for budgeting and controlling "Employee Costs". It is certainly NOT the residual component of the wage to be somehow called "Special Allowance" after adjusting Basic, HRA, and other tax-saving components.

I am afraid we differ on this point. I thought I should provide a clarification for the general benefit of the members.

Regards,
Samvedan
November 24, 2011

Yes, I referred to the cited Act. The term "spl. allowance" is used for DA/VDA, I construe. The Act was formulated in 1948, and the term has not yet been changed to DA by our policymakers. CTC is not legal but is practiced worldwide and accepted. In the CTC regime, the definition of "spl. allowance" is as mentioned above. I think most of the members here are under the CTC regime; that's what I meant.

Regards,
Pon

Dear Mr. Pon,

While fixing the wage rate for Security Guards and some technically skilled workmen, the Special Allowance is considered by the Government under the Minimum Wages Act. In factory areas, the Minimum Wages are comprised of Basic Wages and Special Allowances for the workmen. However, in the construction industry, the Minimum Wages are bifurcated into Basic Wages and VDA (as per CPI).