POLICY ON COMPENSATION

1 OBJECTIVE

To elucidate the compensation architecture of the company.

2 SCOPE

This policy is applicable to all officers in the management cadre and on the permanent rolls of the
company.

3 PROCESS

3.1 Compensation Review

3.1.1 The officer compensation is reviewed by the HR department based on a compensation benchmarking
survey conducted within the industry and based on the business requirements.

3.1.2 Normally this review takes place once a year or as deemed necessary by the Head of HR.

3.1.3 The Compensation structure for new hires is finalized after selection at the time of salary fitment and
communicated to the selected candidate as a part of appointment offer.

3.2 Choosing Elements of Flexible Allowances

3.2.1 At the start of the financial year officers need to indicate their choice towards Flexible Allowance
allocation. This can be done online through the ‘Employee Services Portal’ on SANGAM, the company
intranet.

3.2.2 In case of an officer joining during the financial year, he/ she will also need to follow the process
mentioned in the induction booklet.

Version: 1.1 Released by: Head - HR

Date of Issue: June 2013
4 GUIDELINES

4.1 The Overall Salary structure comprises of the following :

Component Elements

Basic Salary Base salary

Flexible Allowances HRA, LTA, Domiciliary Medical reimbursement, Conveyance Allowance,

Residence Telephone reimbursement, Education Aid and Hostel Subsidy.

Fixed Allowances Additional HRA and Food coupons.

Benefits Hospitalisation, Hard Furnishing, Car & related benefits.

Performance Award Variable Pay linked to officer’s performance.

Job Specific Allowances Operation & Maintenance Allowance, Remote Station Allowance, Night
shift Allowance, Non-practicing Allowance, Project Allowance and benefits.

Retirals Provident Fund, Gratuity & Superannuation.

4.2 Flexible Allowances

Officers can structure and allocate their Flexible Allowance as per their choice within the overall limits as
indicated in the compensation sheet on Sangam, so as to avail of tax breaks. The amounts for each
component of the flexi allowance will be as specified by the officer in the said sheet.

Components of Flexible Allowances

4.2.1 House Rent Allowance (HRA)

Officers staying in company/ leased accommodation are not eligible for HRA.

Officers who are staying in rented accommodation and wanting to claim tax exemption may indicate
HRA as a choice of allowance from within the overall flexi allowances.

Officers claiming tax exemption need to submit to the payroll department a copy of the agreement with
the landlord, the HRA exemption form duly completed and the monthly rent receipts. The rent receipts
need to be submitted at the end of each quarter for all 3 months.

For details refer to policy on ‘Company Owned Accommodation / Leased Accommodation’.

4.2.2 Leave Travel Assistance (LTA)

Officers can allocate an amount towards LTA in their Flexible Allowance in the beginning of the year.

The LTA amount is paid through salary

Tax exemption can be availed on LTA on production of necessary bills and documents.

For details refer to policy on ‘LTA’

Version: 1.1 Released by: Head - HR

Date of Issue: June 2013
4.2.3 Domiciliary Medical Reimbursement

Tax free domiciliary medical reimbursement is available upto Rs. 15,000/- per financial year on
production of bills. The amount not supported by bills will be taxed and paid in the monthly salary at
the end of the financial year.

Bills can be submitted in only 3 installments in the entire financial year.

The last date of submission of bills for the year is March 5th beyond which no bills will be accepted for
claiming tax breaks.

For details refer to policy on ‘Medical’

4.2.4 Conveyance Allowance

Conveyance Allowance is applicable for officers in WL:ME.

It is paid in the monthly salary and is tax free upto Rs. 9600/-/ per annum.

No documentation is required to avail of tax exemption.

4.2.5 Residence Telephone Reimbursement

Residence phone reimbursement can be claimed quarterly on submission of necessary bills and tax
exemption can be availed.

To claim reimbursement the officer needs to create a payment request online through the ‘Employee
Payment System- Officers’ on the company intranet i.e. Sangam

The reimbursed amount is paid through salary.

4.2.6 Education Aid

Tax exemption can be claimed for a maximum of 2 children on production of necessary documents.

For details refer to policy on ‘Education and Hostel Benefit’.

4.2.7 Hostel Subsidy

Tax exemption can be claimed for a maximum of 2 children on production of necessary documents.

For details refer to policy on ‘Education and Hostel Benefit’.

4.3 Fixed Allowances

4.3.1 Additional HRA

Officers residing in company owned/leased accommodation where subsidized electricity is provided

will not be eligible for Additional HRA.

Officers in grades MD1 to MB1 claiming HRA will not be eligible for Additional HRA. However, if
they are residing in company owned/leased flats and not receiving subsidized electricity, they will be
eligible for Additional HRA.

For details refer to policy on ‘Company Owned Accommodation’ and ‘Residential Accommodation on
Company Lease’.

Version: 1.1 Released by: Head - HR

Date of Issue: June 2013
4.3.2 Food Coupons

All Officers working in locations having canteen facility in Mumbai area, such as Trombay, Dharavi,
Distribution, Parel etc. will receive Food coupons worth Rs 500 every month.

All Officers in working in locations where canteen facility is not available will receive a compensatory
allowance of Rs. 500 per month in lieu of Food coupons.

4.4 Benefits

4.4.1 Hospitalization

Officers are eligible for a floater mediclaim policy as per their grades which covers self, spouse and
dependents.

For details refer to policy on ‘Medical’.

4.4.2 Hard Furnishings

Applicable to officers in Grade MB1 to MD1 as per their eligibility.

For details refer to policy on ‘Hard Furnishing’.

4.4.3 Car & related benefits

Applicable to Officers in Grade MB1 to MD2 as per their eligibility.

For details refer to policy on “Company Car – Policy”

4.5 Performance Award

Applicable to all officers as per their grade and performance ratings for the year.

Performance pay quantum will be as per the discretion of the management from time to time.

4.6 Job Specific Allowances

4.6.1 Operation & Maintenance Allowance

All officers who work 6 days and 48 hours per week are eligible to receive this allowance.

4.6.2 Remote Station Allowance

All officers posted at Ambernath receiving station, Panvel camp of Transmission division and Hydro
generating stations of Bhira, Bhivpuri & Khopoli are eligible to receive this allowance.

4.6.3 Night Shift Allowance

Applicable to officers in MD2 to ME4 working on shift duties.

Applicable for days on which officer works for the full night (i.e. ‘A’ shift).

Version: 1.1 Released by: Head - HR

Date of Issue: June 2013
4.6.4 Non-Practicing Allowance

All doctors on the rolls of the company are eligible for Non-Practicing allowance.

4.6.5 Project allowance and benefits

Applicable to officers transferred to different locations at company’s behest and posted at project sites.

For further details refer to policy on ‘Project Related Benefits’.

4.7 Retirals

Provident Fund: 12% of Basic Salary contributed by Company and 12% by Officer.

Gratuity: Officers completing 5 years continuous service in Tata Power Company Limited are eligible.

Superannuation: 15% of Basic Salary, eligible only after confirmation.

For details refer to policies on ‘Provident Fund, Gratuity and Superannuation’.

5 EXCEPTIONS

Any Exceptions to this policy requires the approval of the Managing Director.

Version: 1.1 Released by: Head - HR

Date of Issue: June 2013