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Allowance heatmap: Code on Wages s.2(y) reckoner

Classify common payroll components against Section 2(y) of the Code on Wages, 2019. Each row shows the verdict, the statutory clause it rests on, and an audit-risk flag to guide review of the 50% wages floor.

How to read this reckoner

Included heads count towards wages for the proviso (basic + DA + retaining allowance ≥ 50% of total remuneration). Excluded heads are listed in Section 2(y)(a) to (k). Conditional heads depend on how the component is structured in the salary letter and on documentation.

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Search by component name or clause. Filter by verdict.

Showing 40 of 40

Component	Verdict	Clause	Risk	Note
Basic salary	Included	s.2(y)(i)	LOW	Express inclusion. Forms the floor for the 50% rule under the proviso.
Dearness allowance	Included	s.2(y) main	LOW	Inclusive head; not in the exclusion list.
Retaining allowance	Included	s.2(y) main	LOW	Inclusive head; payable to keep the employee on rolls during off-season.
Statutory bonus	Excluded	s.2(y)(a)	LOW	Bonus payable under any law including the Payment of Bonus Act.
Value of house accommodation	Excluded	s.2(y)(b)	LOW	Value of any house accommodation, light, water, medical attendance or other amenity.
Employer's PF contribution	Excluded	s.2(y)(c)	LOW	Employer's contribution to pension or PF and interest accrued thereon.
Conveyance allowance / travel concession	Excluded	s.2(y)(d)	LOW	Conveyance allowance or value of travelling concession.
Special expenses sum (nature of employment)	Excluded	s.2(y)(e)	MEDIUM	Sum paid to defray special expenses entailed by the nature of employment. Test of genuineness.
House rent allowance	Excluded	s.2(y)(f)	LOW	HRA is expressly excluded.
Overtime allowance	Excluded	s.2(y)(g)	LOW	Remuneration for overtime work.
Commission payable to employee	Excluded	s.2(y)(h)	LOW	Any commission payable to the employee.
Gratuity payable on termination	Excluded	s.2(y)(i)	LOW	Gratuity payable on termination of employment.
Retrenchment compensation / other retiral benefit / ex-gratia on termination	Excluded	s.2(y)(j)	LOW	Any retrenchment compensation, other retiral benefit or ex-gratia on termination.
Performance / variable pay (annual)	Conditional	s.2(y) main + proviso	MEDIUM	Inclusive unless characterised as commission (s.2(y)(h)). Conservative position: include for 50% test if linked to wages, exclude only if pure commission.
Production / incentive bonus (monthly)	Conditional	s.2(y) main	HIGH	Likely included if regular and forms part of pay; statutory bonus alone is excluded. Misclassification risks 50% proviso failure.
Shift allowance	Conditional	s.2(y) main	MEDIUM	Not in the express exclusions. Treat as inclusive unless directly compensating overtime, in which case s.2(y)(g) applies.
Night-shift allowance	Conditional	s.2(y) main	MEDIUM	Same treatment as shift allowance; exclude only the overtime element.
Education allowance	Conditional	s.2(y) main	MEDIUM	Not expressly excluded. Treat as inclusive for the 50% test unless structured as reimbursement against bills.
Medical allowance (fixed, no bills)	Conditional	s.2(y) main	MEDIUM	If paid as a fixed cash component without bills, treated as wages. Reimbursement against bills falls under s.2(y)(b) amenity.
City compensatory allowance	Conditional	s.2(y) main	MEDIUM	No express exclusion; defaults to inclusion.
Telephone / internet reimbursement (against bills)	Excluded	s.2(y)(e) read with s.2(y)(b)	MEDIUM	If paid against bills as a special expense, excluded. Fixed cash allowance leans towards inclusion.
Fuel reimbursement (against bills)	Excluded	s.2(y)(d)	MEDIUM	Falls within conveyance / travel exclusion if structured as reimbursement.
Books and periodicals reimbursement	Excluded	s.2(y)(e)	LOW	Special expense reimbursement against bills.
Driver salary reimbursement	Excluded	s.2(y)(d)	MEDIUM	Conveyance-linked benefit; structure with bills and policy.
Children's education reimbursement (against bills)	Excluded	s.2(y)(e)	LOW	Special expense if supported by school bills.
Hostel reimbursement (against bills)	Excluded	s.2(y)(e)	LOW	Special expense if supported by bills.
Leave travel allowance / concession	Excluded	s.2(y)(d)	LOW	Travelling concession is expressly excluded.
Meal vouchers / canteen subsidy	Excluded	s.2(y)(b)	MEDIUM	Value of amenity. Cash meal allowance defaults to inclusion.
Mobile handset reimbursement	Excluded	s.2(y)(e)	MEDIUM	Special expense if reimbursed against invoice.
Company-provided car (perk)	Excluded	s.2(y)(b)	LOW	Value of amenity.
Employer-provided housing (perk)	Excluded	s.2(y)(b)	LOW	Value of house accommodation.
Insurance premium paid by employer	Excluded	s.2(y)(c)/(b)	MEDIUM	If part of group cover and not in cash, treated as amenity.
NPS employer contribution	Excluded	s.2(y)(c)	LOW	Employer's contribution to pension scheme.
Stock-based compensation (ESOP / RSU / SAR)	Excluded	s.2(y) main (not wages)	MEDIUM	Not 'remuneration' in cash within Section 2(y); historically treated outside wages. Documented exclusion preferable.
Joining bonus / sign-on bonus	Conditional	s.2(y) main	HIGH	Lump-sum at hire; arguably outside 'periodically payable wages'. Conservative position: track separately, exclude from 50% with reasons.
Notice-pay recovery / payout	Excluded	s.2(y)(j)	LOW	Termination-linked payment, excluded under retiral / ex-gratia clause.
Leave encashment on separation	Excluded	s.2(y)(j)	LOW	Treated as retiral benefit on separation.
Leave encashment during service	Conditional	s.2(y) main	MEDIUM	If routinely encashed mid-service, leans towards inclusion.
Provident Fund employee contribution	Included	deducted from wages	LOW	Employee's own contribution is a deduction from wages; the underlying component remains wages.
Professional Tax deduction	Included	deducted from wages	LOW	Statutory deduction; the gross component remains wages.
No components match the current filter.

Source provisions

Section 2(y), Code on Wages, 2019 (definition of "wages") with proviso and explanation.

The 50% rule: where excluded heads exceed one-half of the total remuneration, the excess is added back to wages.

Use the CTC calculator to test wage-floor compliance for a specific salary stack.

This reckoner is illustrative; verdicts must be tested against the actual salary letter and component definitions.

Method and assumptions

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