What Is The Full Form Of CCA In Income Tax?
CCA full form in income tax is City Compensatory Allowance. It’s extra money that some employers give to their workers to help cover the higher costs of living in big cities compared to smaller towns. This shall go a long way in enabling them to gain access to the expensive lifestyle in cities. Unlike the other allowances, CCA is not contingent on what the employee truly spends but the fact that it bases its limit on company rules and how expensive it is to live in certain cities.
Eligibility and Calculation of CCA:
There’s no set rule on who can get CCA. It’s often given to employees depending on their job level and the city where they work. The amount of CCA isn’t tied to the basic salary but varies according to the employer’s policies and the living costs in a particular city. Private companies may extend the same CCA to all irrespective of the level of the job, while the government job may extend CCA in a percentage of the total salary package that can be between 10-20%.
Tax Implications of CCA:
In terms of taxes, the City Compensatory Allowance counts as part of what you earn and is taxed just like the rest of your salary. There is no special tax break or relief on account of CCA, and hence the entire amount gets added up to your total income, which then gets taxed based on your income level. While CCA helps by providing more money for living in expensive cities, it also increases your taxable income. This could have an implication for the amount of money you take home.