Basic salary is a fixed amount to be paid to an employee addition of any allowances or subtraction any deductions. Bonuses, overtime, dearness allowance, etc are not a part of basic pay. It is a part of your take-home amount.
For an home-based employee, allowances such as internet and phone usage will also be added to their basic salary. It ranges from 40% to 50% of the total CTC.
It is the base of your pay structure. Other components of your total pay are calculated depending on your basic pay. These components include Annual Gratuity, Employee Contribution to Provident Fund or ESIC are determined according to your basic.
Annual basic is the monthly basic pay multiplied by twelve months.
Annual Basic = Monthly Basic X 12
There is no fixed formula to Calculate Basic. Depending on the above factors, the basic pay of an employee is calculated.
Usually, it is 40% of the Gross Pay or 50% of the CTC.
Let us understand with a simple example.
Let us assume that Manoj’s Gross Pay is Rs. 35,000. Based on the above metrics, Manoj’s basic will be Rs. 15,000. If Manoj’s CTC is 48000 and if we calculate based on his 50 % of CTC then his basic will be Rs. 24,000.
Gross pay is the amount of salary including allowance but excluding the deductions.
Gross Pay = Basic + DA + HRA + Conveyance + Medical + Other
Hence, to calculate your basic from the gross pay you need to do the reverse calculation. You need to subtract the allowance from the total gross pay.
Basic = Gross Pay – DA – HRA – Conveyance – Medical – Other
Otherwise, if your contract mentions the percentage you can do that directly using the following formula
Basic = Gross Pay X Percentage
We used this formula in the example of Manoj.
To calculate the take-home amount, you can use the Salary Sheet Excel Template.
Income Tax is calculated based on the total take-home amount and not just basic. As it is a component of total salary, it is taxable. This is the reason companies don’t put basic higher than 40%-50% of CTC.
This is a minimal percentage. Taking basic lower will result in a decrease in the other components of the salary that are based on your basic. According to experts, Indian employees at a junior or middle level have a higher basic as compared to senior level.
We thank our readers for liking, sharing and following us on various social media platforms.
If you have any queries or suggestions, please share in the comment section below. We will be more than happy to assist you.
To simplify the process, we have created a simple and easy UK VAT Taxable Turnover…
Every business has to register for VAT with HM Revenue and Customs if their VAT…
We have created the UK VAT Dual Currency Invoice excel template with predefined formulas that…
We have created a simple and easy UK VAT Purchase Register Excel Template with predefined…
We have created a simple and easy UK VAT Sales Register Excel Template with predefined…
We have created a ready to use UK VAT Progress Billing Invoice template in excel…