Dear,
To my knowledge the basic pay should be minimum 30% (State wise minimum wages) of the gross. However, it is in the hands of the HR or accountant to decide and give the recommendations to the management looking at the merits and demerits of fixing the slab in a company.
Fixing a basic pay to the minimum of 30 % has certain demerits and if the slab is increased more than 30% also has some demerits. Such as:-
1) If the basic pay is less, then the deductions towards the provident fund from the employee’s portion will be less.
2) If the basic pay is less ,then contributions from employer’s end on contributing on Provident fund will also be less.
3) Calculations during full and final settlement for an employee will be less.
4) Eligible for bonus if the basic is below 6500/-
Similarly if the Basic pay is more than 30% then it leads to getting into the taxable bracket without any exemptions towards HRA, etc…
Hence, I would suggest to have the slab fixed based on the salaries giving in the company. If maximum # of employees fall under the bracket of tax then better to go for 30% and if it is other wise then increase it as per the need and fix the slab.
However, if this question is raised just to gain the knowledge then, these are the +ve and –ve results of having a high % on basic pay and low % on basic pay.
Hope this helps you.
Regards,
Avi