Basic salary: what it is and why the percentage matters
Basic salary is the fixed core of your pay on which provident fund, gratuity and HRA exemption are calculated, typically 40% to 50% of CTC in India. A higher basic means more PF and gratuity but a lower monthly credit, since 12% of basic goes to EPF from your side.
FY 2026-27 figures, rules verified 3 Sep 2026. Numbers assume basic at 40% of CTC, employer PF inside CTC and ₹2,400 professional tax unless stated.
Employers set basic as a percentage of CTC. Under the Code on Wages, allowances excluded from wages cannot exceed 50% of total remuneration, which pushes companies toward a 50% basic. Many IT services offers still sit at 35% to 40%.
PF is 12% of basic from you and 12% from the employer, of which 8.33% goes to the pension scheme. Gratuity accrues at 15 days of basic per completed year. HRA exemption under the old regime is capped at 50% or 40% of basic depending on the city.
For a 12 LPA CTC, moving basic from 40% to 50% raises the retiral contributions and lowers the monthly credit by a few thousand rupees. Use the basic slider on the calculator to see the exact effect for your package.
See the figure for your own salary on the in hand calculator.
Questions
Related terms
- EPF — EPF stands for Employees Provident Fund, a retirement account under the EPF Act 1952 into which you contribute 12% of basic and your employer another 12%, of which 8.33% of basic capped at ₹1,250 a month goes to the Employees Pension Scheme.
- Gratuity — Gratuity is a lump sum an employer pays when you leave after at least five years of continuous service, calculated as 15 days of your last basic for every completed year: last monthly basic multiplied by 15/26 multiplied by years of service.
- HRA — HRA stands for house rent allowance, a salary component paid toward rent.