Your question is valid. But above is the industry's regular practice. Because no where in labour acts, there is a clear definition of wages mentioned.
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Payment of wages act's definition of “wages” means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employments and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.
The definition of ‘Basic Wages’ has been defined under Section 2(b) of the EPF & MP Act, 1952 as below:
Section 2(b) “basic wages” means all emoluments which are earned by an employee while on duty or on leave or on holidays with wages in either case in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include
i. the cash value of any food concession;
ii. any dearness allowance (that is to say, all cash payments by whatever name called paid to an employee on account of a rise in the cost of living), house rent allowance, overtime allowance, bonus, commission or any other
similar allowance payable to the employee in respect of his employment or of work done in such employment;
iii. any presents made by the employer;
The term “wages” has been defined u/s 2(22) of the ESIC Act in as under:-
1. All remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled.
Payment of bonus act: “salary or wage” means all remuneration (other than remuneration in respect of over-time work) capable of being expressed in terms of money, which would, if the terms of employment, express or implied, were fulfilled, be payable to an employee in respect of his employment or of work done in such employment and includes dearness allowance (that is to say, all cash payments, by whatever name called, paid to an employee on account of a rise in the cost of living), but does not include—
(i) any other allowance which the employee is for the time being entitled to;
(ii) the value of any house accommodation or of supply of light, water, medical attendance or other amenity or of any service or of any concessional supply of foodgrains or other articles;
(iii) any travelling concession;
(iv) any bonus (including incentive, production and attendance bonus);
(v) any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the employee under any law for the time being in force;
(vi) any retrenchment compensation or any gratuity or other retirement benefit payable to the employee or any ex gratia payment made to him;
(vii) any commission payable to the employee.
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When the law itself was not clear on the definition of salary, Take Home salary, Gross salary, wages, CTC, etc., Courts and authorities were also silent in these type of cases. They are solving it through collective bargaining.
You can raise a dispute under Payment of wages act (if your pay is less than 18k per month). But it delays the process of the exit formalities like proper relieving from work and service certificates, etc.,
So, people start adjust the notice period days with their earned leaves and pay of their wages except their performance pays and bonuses.
All the best.