To neutralize the impact of inflation, an allowance is given to the public sector and government employees and pensioners called a dearness allowance. Dearness allowance is fully taxable with salary and according to the Income Tax Act it becomes mandatory to declare the tax liability for dearness allowance along with the salary in the filed return.
Due to constant changes in prices in the market, it becomes necessary for the government to protect the employees from the impact of inflation. It thus aids the employees in adjusting the cost of living and copes up with the increasing prices.
The dearness allowance is calculated on the basis of the location of the employee, thus it varies according to the impact of inflation in every location. The dearness allowance varies from employee to employee depending upon their location – urban, semi-urban and rural sector.
Where it can be added in SalaryBox app?