Understanding CTC: Do We Calculate Basic Salary from CTC or Gross CTC?

On which amount do we calculate the basic? Is it the CTC amount or the gross CTC amount?

Ranjeet Kumar
ranjeet_kumar393@yahoomail.com

Dear Ranjeet,

The basic is normally calculated based on the gross salary. Please search this forum as the same topic has been discussed many times here.

Thank you.

Dear Prasanna Kumar,

Please make use of the search tab provided in this forum, as there is a wealth of information available on the requested topic.

Thank you.

Dear All,

The terms Basic and CTC need not be interrelated at all. The Basic salary is fixed by the employer at his own free will. While fixing the basic, one needs to ensure that the company follows the Minimum wages for the category of employment only. The Minimum Wages Act, which is amended from time to time for various industries, forms the guideline for fixing Basic and DA. If you pay above the act, then there is no need to link it either with the Gross Wages or CTC. However, some companies follow this pattern, but it is not mandatory or statutory.

Trust the matter is clear.

M.V.KANNAN

Dear Mr. Rajneeth Kumar,

There is no fixed (statutory) percentage for basic whether on CTC or Gross Salary. Basic is basically fixed keeping in mind The Minimum Wages Act 1948 that is laid down by the respective state government and the employment category as mentioned above by Mr. M.V. Kannan. Conventionally, it is around 40% of the Gross salary arrived at, which is very convenient to process PF and other statutory obligations.

Regards,

Shreekanth. P. R

Dear Ranjeet,

1. The basic salary is 40% of the gross salary in non-metro areas.
2. The basic salary is 50% of the gross salary in metro areas.
However, please ensure that this calculation does not violate the applicable minimum wage.