12 April 2010
Dearness Pay is an amount where a part of allowances are treated as pay.
Dearness allowance (D.A.) is part of a person's salary. D.A. is calculated as a percent of the basic salary. This amount is then added to the basic salary along with house rent allowance to get the total salary. Rates vary as per rural/urban areas etc However, for income tax purpose the above components of pay are not included if the same is not accounted for in pension and other retirement benefits employee’s contribution to provident fund.
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