What is City Compensatory Allowance?

City Compensatory Allowance (CCA) is an allowance given to employees from the company as high cost of living in Tier 1 cities and sometimes Tier 2 cities. Whether the employee is working in the public sector or private sector, this is to provide the best its employees in order to retain them against the competitive scenario.

CCA is usually depending on the grade and pay scale of an employee, regardless of their salary. City Compensatory Allowance is fully taxable. CCA keeps varying from one city to a different city. CCA has no upper or lower value. Individuals work towards creating a standard of living in a metropolitan city. However, this doesn’t come easy to live in. Therefore, it’s necessary for an employer to ensure that their employees are paid appropriately with this kind of allowance.

A CCA is offered to an employee living/ working in a Tier-1 city such as Mumbai or Delhi or Bangalore. Mostly CCA is offered to lower or medium-level employees to support them in meeting their living expenses in big cities. It is not offered to a higher level or top management employees because their pay scale has already been adjusted by keeping their standards of living in account.

Also, See: Dearness allowance (DA)