Why Is Basic Salary 50% in Metro Cities and 40% Elsewhere? Understanding the Differences

Understanding Salary Components in Metro and Non-Metro Cities

Can I know the brief knowledge about the reason for calculating basic salary as 50% in metro cities and 40% in others? Is there any particular standard that is followed? We know it's basic 50%, HRA - 25%, PF 12.5%, but why is it structured this way? Who created it, and why does it differ in some organizations?

The condition of 50% in Metro and 40% in other cities is for HRA, not for Basic. This is due to the fact that the Income Tax Act allows HRA exemption as follows:

The least of the following is exempt as HRA:
1. 50% of Basic+DA for Metro Cities (40% for others)
2. Rent paid - 10% of Basic+DA
3. Actual HRA received

There is no law which prescribes Basic to be maintained at a certain percentage of Gross Salary. However, generally companies maintain the Basic vs Allowances ratio as 50:50 or 60:40.

Regards,
Rajiv