What is salary?
Salary is the fixed, regular payment an employer makes to an employee for their work, usually paid monthly. A salary structure is how that pay is divided into components such as basic salary, HRA, special allowance and other allowances, along with the deductions taken before it reaches the employee's bank account.
A typical Indian salary structure has three layers. Earnings: basic salary, HRA, special allowance, and sometimes LTA, conveyance or meal allowances. Deductions: employee PF, professional tax and TDS. Employer-side costs such as employer PF and gratuity, which sit inside CTC but never appear as pay.
The split matters because each component is treated differently. PF and gratuity are calculated on basic, HRA can be partly tax-exempt under the old regime, and most other allowances are fully taxable. Two offers with the same CTC can deliver very different take-home pay.
In India
The Code on Wages defines “wages” as basic + DA + retaining allowance, and if excluded allowances exceed 50% of total pay, the excess is added back to wages. Since November 2025, structures with a small basic must be rebalanced, which raises PF and gratuity and can lower take-home.
In practice
An employee earns ₹1 L a month: ₹30,000 basic, ₹15,000 HRA and ₹55,000 special allowance. Allowances make up 70% of pay, so the extra ₹20,000 above the 50% limit counts as wages for PF and gratuity. At the next revision, the company restructures basic to ₹50,000.
Common questions
What is salary in simple words?
The fixed amount an employer pays an employee for their work, usually every month.
What is the difference between salary and wages?
In everyday use, salary is fixed monthly pay and wages are often paid by the hour or day. Under the Code on Wages, wages is a legal term covering basic, DA and retaining allowance, used to calculate PF, gratuity and bonus.
What are the components of salary in India?
Basic salary, HRA, special allowance and other allowances, minus deductions for employee PF, professional tax and TDS.