Quick Tution - Accounts, Finance & Tax Concepts in Short & Easy to Remember Format

Definitions Basic Salary There is no definition of Basic salary in the law. However common practice due to historical reasons is that Basic salary is 100/155 of “Gross salary”. Gross salary being monthly “fixed” amount. As common practice “House rent allowance” is set at 45% of Basic salary and “Utility allowance” is set at 10% of Basic salary. In some pay structures fixed “Conveyance allowance” (usually 300 rupees) is made part of Gross salary. Under current tax laws Gross salary is taxable hence the break up has no importance for taxation. Minimum Time Scale of Basic Salary The concept is due to government pay structures. A Basic salary pay scale is like “20,000 – 1,000 – 30,000”, wherein for certain “grade” Basic salary starts at 20,000 (the minimum time scale of basic salary) and each year Basic salary is increased by 1,000 till it reaches maximum scale of 30,000 thereafter no increase is made in that grade.