Is Our Special Allowance Subject to Provident Fund Deductions? Seeking Urgent Advice

Dear Seniors,

We are paying a special allowance under one of our Salary Head. One of our legal consultants has mentioned that the special allowance is applicable for Provident Fund deduction. I am quite doubtful about this. Can you please guide me on this matter?

This issue is very important and urgent.

Regards, Ali

Yes, any term Special Allowance or Special Pay will attract PF. I tried to change it to Personal Pay, but there were issues. PF Authorities in Tamil Nadu did not pursue it after I modified it to Personal Allowance. Also, include in the letter sanctioning Personal Allowance that the same may be withdrawn at any time.

Siva

Yes, incentives can be used. You can utilize Variable Performance Pay and continue to modify it every year for the individual.

Siva

Yes, special allowance is subject to deduction for PF, which is evidenced by the judgment below:

The judgment of the regional PF commissioner is as follows: "Special allowance being paid to the employees appeared to be the dearness allowance which has been described by a different name; as such, the special allowance would be part of the 'basic wages'. (Regional Provident Fund Commissioner V/s Vivekananda Vidya Mandir, 2005 LLR 399 (Cal)).

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