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Dearness Allowance, for short called as ' D.A ' in abbreviated form, is the allowance given to employees in addition to their basic wages to compensate the hike in prices of essential commodies.
It can be fixed or variable. It can also be determined as a percentage to basic wages or as an allowance dependent on the variation in the general price level.
Variable Dearness Allowance or ' VDA ' on the other hand is the D.A which is so arranged in such a manner that it varies according to the variation in the price levels. To determine the percentage of VDA, it is linked to any one of the Cost of Living Indices which have different year as their own base year. Every hike in the relevant CPI from the base year is taken into a/c on average basis over a period of six months or twelve months, a certain monetary value is added to evey point of hike and the total value is determined as VDA for the succeeding period of six months or one year as the case be.
For the purpose of calculation of income tax and employment benefits like EPF, statutory gratuity etc., both fixed D.A and V.D.A are taken into account.
From India, Salem
It can be fixed or variable. It can also be determined as a percentage to basic wages or as an allowance dependent on the variation in the general price level.
Variable Dearness Allowance or ' VDA ' on the other hand is the D.A which is so arranged in such a manner that it varies according to the variation in the price levels. To determine the percentage of VDA, it is linked to any one of the Cost of Living Indices which have different year as their own base year. Every hike in the relevant CPI from the base year is taken into a/c on average basis over a period of six months or twelve months, a certain monetary value is added to evey point of hike and the total value is determined as VDA for the succeeding period of six months or one year as the case be.
For the purpose of calculation of income tax and employment benefits like EPF, statutory gratuity etc., both fixed D.A and V.D.A are taken into account.
From India, Salem
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