Understanding Dearness vs. Special Allowance in Maharashtra: How Should We Calculate PF and Gratuity?

Our company is based in Mumbai. We do not have Dearness Allowance in our compensation structure, but we have Special Allowance salary components. Are Dearness Allowance and Special Allowance the same for Maharashtra state? Do we need to calculate PF and Gratuity based on the percentage of Basic salary or Basic+Special Allowance percentage?

Special allowance is not dearness allowance. If your company doesn't have dearness allowance as a component, then you need to calculate PF only on Basic wages.

If you see the minimum wages notification for Maharashtra, you will notice that the state government is providing basic and special allowances as components of wages. Therefore, it is possible that the labor officer and the courts would consider it as a part of DA.

One safe way to handle this would be to meet the Public Relations Officer (PRO) of the Provident Fund (PF) department and obtain a written clarification. However, it is likely that the department will advise you to pay it based on the entire wage.

In Maharashtra, DA is called the Special Allowance under the Minimum Wages Act. The Special Allowance is revised in January and July.

Dear Friend,

I am also with Kprasson. For all purposes, we include Basic & Spl Allowance, so why not term it differently, as it is linked to the current situation in the market.

Regards

Hello all,

If special allowance is equivalent to DA in Maharashtra, then the PF contribution will be Basic + special allowance. So, in this case, do we have to pay the revised PF contribution from the DOJ (backdated) or can we start from this month onwards? Please clarify.

Regards,
Sumita Mehta