Dear Khalid,
My answer may seem to be a bit lengthy. But I feel such a response becomes inevitable because a good deal of questions is asked on the concept of salary or wages of employees with reference to components as well as to CTC. Salary or wage, as I understand, is simply the over all monetary consideration payable by the employer to the employee hired by him for the services rendered as per the contract of employment. However, the cost of retention of labor as well as social security eventually added to the salary or wage either by way of convention or by statutory compulsion has enlarged the terms of the contract of employment relating to the compensation part of the labor resulted in the bifurcation of the concept of wage/salary into basic and allowances. However, this bifurcation is not compulsory and the salary/wage can also be a consolidated one based on the demand and supply of labor provided it does not fall short of the statutory minimum wages,if any fixed. No hard and fast rule nor any straight-jacket formula for bifurcation of salary/wages into basic and allowances.
However, the difference in the definitions of the term " salary or wages " under various Labor Laws mandates the bifurcation of the overall salary or wages payable to employees. In the absence of bifurcation, the entire sum paid is taken into account for the computation of various benefits of employment such as PF, gratuity, bonus etc. Hence the bifurcation mainly to reduce the indirect financial commitments of the employer.
I infer that the package of Rs.3 lakh mentioned is per annum. If the basic pay of Rs.25000/= mentioned is per month, then there is no break-up and it is just a consolidated salary only. Can you please explain?