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CMA Intermediate · Business Laws and Ethics · The Code on Wages, 2019

Mehta Textiles pays an employee a monthly remuneration of ₹80,000 made up of: basic pay ₹30,000, dearness allowance ₹5,000, house rent allowance ₹25,000, bonus ₹10,000 and conveyance allowance ₹10,000. Applying the 'wages' definition, including the rule on excluded components exceeding one-half of total remuneration, what are the employee's wages?

Wages are ₹40,000. The excluded items (HRA, bonus, conveyance) total ₹45,000, which exceeds half of the ₹80,000 remuneration by ₹5,000. That excess is added to basic pay and dearness allowance of ₹35,000, giving ₹40,000.

  1. A₹35,000
  2. B₹40,000Correct
  3. C₹45,000
  4. D₹80,000

Explanation

Excluded components: HRA 25,000 + bonus 10,000 + conveyance 10,000 = ₹45,000. One-half of total remuneration is ₹40,000, so the excess of ₹5,000 is added back to wages. Wages = 30,000 + 5,000 + 5,000 = ₹40,000, which is also exactly half of ₹80,000. The figure of ₹35,000 ignores the add-back.

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