Employees need to understand basic salary as it forms the foundation for calculating other salary components like PF and gratuity. Employers generally use simple methods to calculate one's basic pay.
The formula for Calculating Annual Basic Salary is:
Annual basic salary = monthly basic salary X 12 months
However, there is no single set formula, as approaches may differ between companies. Often, basic pay is set around 40-50% of the total salary package.
Another formula is Basic salary = Gross pay – total allowances. Allowances refer to additional monetary benefits provided besides basic wages.
Employers can also calculate basic salary as a percentage of the company's total cost for an employee. Online salary calculators are helpful for employees to independently work out their take-home income without involving the employer. This gives a clear picture of the overall compensation with different parts.
Also Read: What is CTC, and How It is Calculated?
Let's understand this with an example. Suppose someone’s gross salary is Rs. 30,000. Now, gross salary includes basic pay plus all allowances. We need to subtract the total allowances from gross salary to calculate basic. Let's say this person gets Rs. 5,000 as house rent allowance and Rs. 2,000 as conveyance allowance.
So, Gross Salary = Rs. 30,000
Total Allowances = House Rent Allowance (Rs. 5,000) + Conveyance Allowance (Rs. 2,000) = Rs. 7,000
Now, to get the Basic Salary, subtract the total allowances from gross salary:
Basic Salary = Gross Salary - Total Allowances
= Rs. 30,000 - Rs. 7,000
= Rs. 23,000
Therefore, the basic salary in this case is Rs. 23,000.
Also Read: Gratuity in Salary: Meaning, Calculation, & Taxation
Multiple interrelated factors determine a person’s basic salary:
Also Read: What is PF(Provident Fund)? How is PF Calculated on Salary?
Apart from basic pay, several other regular and semi-regular payments contribute to an employee's total earnings. Here are some key components of a salary structure:
Also Read: What Is The Minimum Salary For Personal Loans
Additions are components added to basic pay, such as allowances, to calculate the gross salary. Key additions are:
Also Read: What Are The Salary Requirements For Qualifying For A Personal Loan
Important compulsory and voluntary deductions from gross salary are:
Also Read: Can I Get A Personal Loan If Salary Is Less Than 15,000?
Taking a personal loan can be helpful in some situations if your basic salary is low, but it should be repaid on time to avoid further costs:
You can apply for an instant personal loan with HerofinCorp in two ways: Online through the HeroFinCorp personal loan app and offline:
Basic salary forms an important part of everyone's compensation package. Understanding how it is structured and what impacts the amount is crucial. Calculating basic pay accurately helps to assess the overall remuneration being offered. Hope this article provided useful insights into the meaning, calculation, components and various aspects of an individual's basic salary. Proper financial planning is needed to make the most of the earnings.
Annual basic salary = monthly basic salary X 12 months
Basic pay can differ from company to company, as it's important to understand that there is no set method for calculating it.
This formula is used for calculating the base pay based on factors such as gross pay and allowances: Basic salary = Gross pay- total allowances (medical insurance, HRA, DA, conveyance, etc.)
Basic pay is fully taxable. The basis of the pay system is the basic salary, which accounts for 40–45% of the overall salary. Additional pay components such as ESIC, Gratuity, and Provident Fund are calculated based on the base pay.
In India, leave encashment received throughout your employment period is fully taxable as part of your salary. However, Section 89 of the Income Tax Act 1961 allows access to some tax benefits.
Special allowances consist of the amount of money with taxable and tax-exempt components added to an employee's base pay for various reasons. They change according to the employee's role, performance, and the company's financial condition.
Yes, you can get a personal loan with a 24000 salary, provided you meet the lender’s eligibility criteria, such as credit score, employment stability, and debt-to-income ratio.
Disclaimer: The information provided in this blog post is intended for informational purposes only. The content is based on research and opinions available at the time of writing. While we strive to ensure accuracy, we do not claim to be exhaustive or definitive. Readers are advised to independently verify any details mentioned here, such as specifications, features, and availability, before making any purchasing decisions. Hero FinCorp does not take responsibility for any discrepancies, inaccuracies, or changes that may occur after the publication of this blog. The choice to rely on the information presented herein is at the reader's discretion, and we recommend consulting official sources and experts for the most up-to-date and accurate information about the featured products.
Employees need to understand basic salary as it forms the foundation for calculating other salary components like PF and gratuity. Employers generally use simple methods to calculate one's basic pay.
The formula for Calculating Annual Basic Salary is:
Annual basic salary = monthly basic salary X 12 months
However, there is no single set formula, as approaches may differ between companies. Often, basic pay is set around 40-50% of the total salary package.
Another formula is Basic salary = Gross pay – total allowances. Allowances refer to additional monetary benefits provided besides basic wages.
Employers can also calculate basic salary as a percentage of the company's total cost for an employee. Online salary calculators are helpful for employees to independently work out their take-home income without involving the employer. This gives a clear picture of the overall compensation with different parts.
Also Read: What is CTC, and How It is Calculated?
Let's understand this with an example. Suppose someone’s gross salary is Rs. 30,000. Now, gross salary includes basic pay plus all allowances. We need to subtract the total allowances from gross salary to calculate basic. Let's say this person gets Rs. 5,000 as house rent allowance and Rs. 2,000 as conveyance allowance.
So, Gross Salary = Rs. 30,000
Total Allowances = House Rent Allowance (Rs. 5,000) + Conveyance Allowance (Rs. 2,000) = Rs. 7,000
Now, to get the Basic Salary, subtract the total allowances from gross salary:
Basic Salary = Gross Salary - Total Allowances
= Rs. 30,000 - Rs. 7,000
= Rs. 23,000
Therefore, the basic salary in this case is Rs. 23,000.
Also Read: Gratuity in Salary: Meaning, Calculation, & Taxation
Multiple interrelated factors determine a person’s basic salary:
Also Read: What is PF(Provident Fund)? How is PF Calculated on Salary?
Apart from basic pay, several other regular and semi-regular payments contribute to an employee's total earnings. Here are some key components of a salary structure:
Also Read: What Is The Minimum Salary For Personal Loans
Additions are components added to basic pay, such as allowances, to calculate the gross salary. Key additions are:
Also Read: What Are The Salary Requirements For Qualifying For A Personal Loan
Important compulsory and voluntary deductions from gross salary are:
Also Read: Can I Get A Personal Loan If Salary Is Less Than 15,000?
Taking a personal loan can be helpful in some situations if your basic salary is low, but it should be repaid on time to avoid further costs:
You can apply for an instant personal loan with HerofinCorp in two ways: Online through the HeroFinCorp personal loan app and offline:
Basic salary forms an important part of everyone's compensation package. Understanding how it is structured and what impacts the amount is crucial. Calculating basic pay accurately helps to assess the overall remuneration being offered. Hope this article provided useful insights into the meaning, calculation, components and various aspects of an individual's basic salary. Proper financial planning is needed to make the most of the earnings.
Annual basic salary = monthly basic salary X 12 months
Basic pay can differ from company to company, as it's important to understand that there is no set method for calculating it.
This formula is used for calculating the base pay based on factors such as gross pay and allowances: Basic salary = Gross pay- total allowances (medical insurance, HRA, DA, conveyance, etc.)
Basic pay is fully taxable. The basis of the pay system is the basic salary, which accounts for 40–45% of the overall salary. Additional pay components such as ESIC, Gratuity, and Provident Fund are calculated based on the base pay.
In India, leave encashment received throughout your employment period is fully taxable as part of your salary. However, Section 89 of the Income Tax Act 1961 allows access to some tax benefits.
Special allowances consist of the amount of money with taxable and tax-exempt components added to an employee's base pay for various reasons. They change according to the employee's role, performance, and the company's financial condition.
Yes, you can get a personal loan with a 24000 salary, provided you meet the lender’s eligibility criteria, such as credit score, employment stability, and debt-to-income ratio.
Disclaimer: The information provided in this blog post is intended for informational purposes only. The content is based on research and opinions available at the time of writing. While we strive to ensure accuracy, we do not claim to be exhaustive or definitive. Readers are advised to independently verify any details mentioned here, such as specifications, features, and availability, before making any purchasing decisions. Hero FinCorp does not take responsibility for any discrepancies, inaccuracies, or changes that may occur after the publication of this blog. The choice to rely on the information presented herein is at the reader's discretion, and we recommend consulting official sources and experts for the most up-to-date and accurate information about the featured products.