What is the full form of CCA?

CCA: City Compensatory Allowance

CCA stands for City Compensatory Allowance. It is part of the CTC of employees. It is an allowance that is provided by public sector or private sector companies to their employees as compensation for the higher living cost in Tier-1 or metropolitan cities such as New Delhi, Mumbai, Bangalore, Hyderabad, etc.

CCA may vary as per the standard of living or cost of living in different cities. For example, CCA in a city like Mumbai may be higher than that of another city like New Delhi. Similarly, in rural areas, employees may get a lower City Compensatory Allowance than the employees working in a big city. Besides this, the CCA can be based on the pay scale or grade of the employee or basic salary of employees. It is mentioned in the salary slip of the employees. It is also counted among one of the strategies of companies to retain their employees.

CCA is paid as a fixed amount instead of a percentage of basic pay in the private sector. However, in the public sector or government jobs, CCA is calculated as a percentage of their CTC (Cost to the Company) and it can be 10% to 20% of the CTC. It remains the same for all employees in a city irrespective of their designation such as clerk, manager, etc.

Furthermore, there is no maximum or minimum limit for CCA and is determined by the employer and it is fully taxable as per section 10(14) of the income tax act, 1961.

Calculation of CCA:

The calculation of CCA is mostly decided by employers. They may choose any of the salary structures and it also adheres to the guidelines of the labour laws. The common factors that are considered to calculate CCA include the cost of living index of a city and employment policies.

Eligibility for CCA:

There is no specific criterion for CCA. It is mostly offered to employees of middle and lower level as compensation for the high living expenses in a metro city. Employees of top management do not get CCA as their CTC is already developed as per their standard of living.

CCA is different from House Rent Allowance which is given to employees for living in rented accommodation. It is also different from Dearness Allowance (DA) that is offered to employees as compensation for the rising inflation. It is also calculated as a percentage of the basic pay.