Basic Salary

Basic salary is the fixed core component of an employee's pay, before allowances, bonuses, and deductions. It is the base for calculating PF, gratuity, HRA, and many other components.

What is Basic Salary?

Basic salary forms the foundation of the salary structure. Statutory contributions like PF (12%) and gratuity (4.81%) are computed on basic + DA. HRA and many allowances are typically set as a percentage of basic. Most companies set basic at 40 to 50% of CTC to balance compliance cost with employee tax efficiency.

How Basic Salary is used

Basic appears as a separate line on the payslip. It is fully taxable and forms the base for most statutory calculations.

Basic Salary FAQs

What percentage of CTC should basic be?

Most companies set basic at 40 to 50% of CTC. The Code on Wages (once fully implemented) requires basic + DA to be at least 50% of CTC.

Is basic salary taxable?

Yes, basic salary is fully taxable as part of "Income from Salary".

Can basic be lower than minimum wage?

No. Basic + DA must meet the state minimum wage for the relevant category of work.