06-10-2010, 08:38 PM
<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.
<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.
