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+--- Thread: Formula of Basic Salary (/showthread.php?tid=8144)
Formula of Basic Salary - AbdulSamad - 06-10-2010
Can any one tell me what is the formula to calculate "Basic Salary"? if it pertain to any section, please provide.
I have read 10% medical allowance Exempt on basic salary if company not provide any medical treatment or hospitalization charges.
Thanks
Abdul Samad
- Imran Sheikh - 06-10-2010
In Which Gross Salary Include all allowances 100% benfit of employee. Basic Salary 55% of Gross Salary. For Expample G Salary of Ali 100,000 K.Then 55% of 100,000= 55,000 is Basic othen then Allowances.
Regards,
M Imran Sheikh
- muslimpakistani - 06-10-2010
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Imran Sheikh</i>
<br />In Which Gross Salary Include all allowances 100% benfit of employee. Basic Salary 55% of Gross Salary. For Expample G Salary of Ali 100,000 K.Then 55% of 100,000= 55,000 is Basic othen then Allowances.
Regards,
M Imran Sheikh
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Dears,
There is no section which dictate or provide guidelines to calculate the basic salary. Its up to the employer and employee what they mutually decide.
<b>Commonly Used Formula</b>
The simple way of calculating the Basic Salary is to divide Gross salary by 1.5. Suppose gross salary of Mr. A is Rs. 45,000. Just divide it by 1.5 and you will get the result that the Basic Salary of Mr. A is Rs. 30,000 and Rs. 15,000 are allowances.
<b>Why this formula was come into use</b>
In Income Tax Ordinance, 1979 there was rule that you can not allow allowances more than 50% of the Basic Salary.(BS) Therefore, people started to divide salary in three parts. Two parts as Basic Salary and one part are allowances.
<b>Why I.T.O. fix the percentage of allowances</b>
At that time many allowances are exempt from income tax like, House Rent 45% of BS, Utilities 10%, Conveyance Rs. 3600 and medical 100%. Therefore, CBR was forced to restrict the allowances up to fix percentage.
<b>Final Words</b>
Even now when all the allowances are taxable except the medical allowance (Up to 10% of BS) People are still using the same formula.
Hope i have explained the matter.
- AbdulSamad - 06-10-2010
Thanks Muslim Pakistani
Actually our tax consultant exempt 10% Medical which calculation below-
100,000 gross Salary
Gross Salary - Medical Allowances
100,000 - (100,000/11)
100,000 - 9,090
90,909 x 12 = 1,090,909 is taxable income
is that correct?
- hijaze - 06-14-2010
This formula is technically right.
<i>Originally posted by AbdulSamad</i>
<br />Thanks Muslim Pakistani
Actually our tax consultant exempt 10% Medical which calculation below-
100,000 gross Salary
Gross Salary - Medical Allowances
100,000 - (100,000/11)
100,000 - 9,090
90,909 x 12 = 1,090,909 is taxable income
is that correct?
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