Basic Salary & Rule India | Basic Salary Calculation Formula

Basic Salary & Rule India | Basic Salary Calculation Formula

5-6 minute

Basic Salary Meaning

A basic salary means a take-home salary or base income which the employee generates. It does not include overtime pay, commission, bonus, or any other type of compensation provided by the company. Basic salary refers to the ''fixed amount'' paid by an employer to an employee in lieu of the roles and responsibilities assigned to and discharged by the employee. Your gratuity, EPF, and ESIC are deducted based on your basic salary. Your basic salary amount will depend upon your designation and the kind of industry you work in.

Birth of ''Salary''

The term ''Salary'' is derived from the Latin word ''Salarium'', a term given to the quota of salt given to Roman soldiers along with their pay. When the process of transporting and preserving the huge bulk of salt became cumbersome for officers, they started offering the sum of money rather than commodities. The money came to be known as salt money or salarium that turned to ''salary'' in modern English.

It Includes:

Base Salary Elements

EARNING

• Basic - Rs. 20,000
• Dearness Allowance - Rs. 4,000
• House Rent Allowance - Rs. 9,600
• Conveyance Allowance - Rs. 800
• Other Allowance - Rs. 5,600

DEDUCTIONS

• Provident Fund - Rs. 2,880
• Professional Tax - Rs. 200
• Tax deducted at source - Rs. 4,042
• Other Deductions - Rs. 2,000

Gross Salary

It refers to the amount of money paid to an employee before tax or any other deduction is made. It also includes overtime pay and bonuses.

Net Salary

This is what remains as salary after statutory deductions such as taxes have been made from the gross salary. Net salary is a person''s actual ''take-home'' salary.

Dearness Allowance

This is a component of gross salary including some fixed percentage of the basic salary, which is aimed at balancing the impact of inflation. It means a living adjustment allowance paid to an employee depending on his locality.

House Rent Allowance

It is the part of gross salary paid to employees for meeting the accommodation expense related to renting or residential purposes. HRA is accounted based on Income Tax Act Rules.

Conveyance Allowance

It is the part of gross salary offered to employees for compensation for their travels from residence to and fro from the workplace.

Other Allowance

It is the component of gross salary, which may include food allowance, medical reimbursements, telephone bills, etc.

EPF Contribution

That portion of the gross salary which is contributed by 12% from the basic pay by employees in the Employer Provident Fund and 13.61% by employers. Depending upon the choice of employees they can increase their contribution of EPF to 100%.

Professional Tax

Component of the deduction amount which the employee has to compulsorily pay to the government as per the pre-defined tax slab based on gross salary.

TDS

Part of the deduction amount that mandatorily has to be deducted under the rules of income tax.

Other Deductions

A portion of the deduction amount which may consist of an amount related to any scheme, investment, etc.

Cost To Company

CTC is the summation of House Rent Allowance, Provident Fund, and Medical Insurance added to the Basic Salary. It means the company''s expenditure towards hiring and continuing the services of employees.

Basic Salary Calculation Formula

There is no fixed formula for basic salary calculation. It generally depends on the components of the salary structure of an employee. Usually, it comes out to be 40% of the gross pay or 50% of the CTC.

Gross Salary = Basic salary HRA (House rent allowance) DA (Dearness allowance) MA (Medical allowance)

Tax Liability

It is mentioned that according to the provisions under Income Tax Act 1961, a certain percentage of net salary has to be given to the government as income tax. The amount that one has to pay will depend on the income tax slab decided by the government for that financial year.

The Income Tax Slab for Financial Year 2021-22 is:

Basic Salary Rule

Under the New Wage Code Rules, a stipulation has been made that says an employee''s basic salary needs to be 50% of the total salary or the CTC. That simply means that with the new code, the take-home salary will reduce for an employee, though simultaneously, their basic minimum salary may go up.

Average Salary in India

The average salary in India is 31,900 INR per month and 3,82,800 INR per annum. According to July 2021 exchange rates, that is 428.49 USD per month.

What Is The Meaning Of Absence Management And Its Importance | HRMantra HR Software

Sukriti Saini 2-2 minutes 09/05/2019

Absence Management

Simply put, when an employee is on leave for a considerable amount of time and his work is assigned briefly to other employees until he comes back is known as absence management. Sometimes due to unavoidable reasons many employees can take leave for a good number of days. There are, therefore, high chances of work getting mismanaged or delayed in such conditions. In order to restrain the situation where the work gets compromised, the HR tells managers to allot other team members of the absentee to do the work for a brief period. It is important for HR as a representative of the company in front of employees to provide support to the absent employee through literal support of his health issues and through work-life-balance. Conversely, ensuring the direction of his work wisely to other employees not feeling burdened with the additional burden and the company is running smoothly.

Types of Absences HR Deals With

• Authorized Leave: This includes maternity leave, paternity leave, annual leave, educational leave, etc.
• Unauthorized Leave: Unauthorized absence is failing to report to the workplace without good reason.
• Sickness Leave: This can be short term and long term.

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