What is Basic Salary? #
Basic salary is a fixed component in the salary structure, and it is the core of an employee CTC. The basic salary does not include bonuses, benefits, or any other compensation from employers.
It is a fixed compensation in the salary structure of an employee and generally depends on the employee’s designation. For employees who are appointed as per the pay scale structure, then the basic will increase every year otherwise it remains fixed.
Basic salary will differ according to the type of industry and employee designation. For instance, employees in the information technology industry prefer more take-home salaries while employees at manufacturing companies get more fringe benefits.
The basic salary is the minimum guaranteed salary for an employee without any deduction applied. It is the primary and essential salary component of any salary structure irrespective of the industry.
How is Basic Salary calculated? #
The basic salary is usually calculated at 40 to 60% of the employee’s cost to the company (CTC). Basic salary takes the major portion of the employee CTC as the primary salary component. The rest of the CTC is divided into other salary components such as HRA, Conveyance, and Medical allowance, etc., Basic is also taken as a benchmark for the calculation of many other allowances & deductions such as HRA, conveyance, and other earning components calculations. A basic salary is essential for considering statutory provisions like gratuity etc.,
Annual CTC – 8,00,000/-
Basic 50% Of CTC – 4,00,000/-
HRA– 50% Of Basic – 2,00,000/-
Conveyance Allowance – 19,200 (1600/- per month)
Fixed Medical Allowance – 15,000 (1250/- Per month)
Custom Allowance – 1,65,800/-
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