Very simple, my view about "salary' is that 'salary' means the amount your employer considers for deduction in case you take a leave without pay. The employers (of course, the HR or the Personnel Managers) consider gross pay inclusive of all allowances to deduct a LOP but will take only Basic pay for calculating benefits payable to the employees. This is wrong. If you are offered a salary, it will be gross amount and it is for the convenience of the employer that the same is bifurcated into smaller compartments and the employee will never say that his basic should be this much, the HRA should be like this and so on. That means salary in total should be the base for everything, deciding notice pay, compensation for termination of employment, calculation of gratuity, leave encashment etc.