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?
From India, Mumbai
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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?
From India, Mumbai
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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
From India, Gurgaon
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3The 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
From India, Gurgaon
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Creating a Competitive Salary Structure.doc
Salary Structure.zip