Money Management

why understand salary structure matters Whether you are starting a new job or reviewing your current salary, knowing your salary structure can really help you to handle your taxes and bonuses better, and also it will help you to negotiate your salary in future for a better deal. what is basic salary? Basic salary is a fixed part of your salary without all benefits and allowances such as house rent, travel allowance or any additional benefits your employer will provide you. componants or basic salary. Normally, basic salary is the salary that does not include any allowances or benefits, just like house rent allowance or travel allowance. It’s the base of your salary and your Provident fund or gratuity is calculated using this part of your salary. Role of basic salary in salary structure Normally in Pakistan, basic salary makes up to 35% to 50% of your gross salary, and it serves as the base of your salary. Mostly your bones and PF are calculated using your basic salary. Is basic salary taxable? Yes your basic salary is 100% taxable under the Pakistan income tax ordinance What is Gross salary? Gross salary is what an employee earns before any deductions like tax or provident fund or any other form of deductions. It include allowance Bounes or home rent. Components of Gross salary. These are the main components of Gross salary Basic salary Vs Gross salary. ( Key Differences) Real-life example with Calculation . Let’s say your basic salary is like 40000PKR. If you add your allowances to it, which may be around 20000, your Gross salary will become 60000, and after deductions like tax or provident fund your Net you will get your net salary let’s say deduction are 5000 your net salary will be 55000PKRs. Frequently Asked Questions: Basic Salary vs Gross Salary (Pakistan 2025) What does basic salary include? Basic salary is the fixed part of your pay, excluding allowances and bonuses. It serves as the foundation for statutory benefits like provident fund and gratuity and is 100% taxable in Pakistan. 0 What components are part of gross salary? Gross salary includes your basic pay plus allowances such as HRA, medical, conveyance, performance bonuses, and any other earnings before deductions. 1 How is salary taxed in Pakistan? The FBR applies progressive slabs. For example, annual taxable income up to PKR 600,000 is tax-free; income above that is taxed under slab percentages ranging from about 5% to 35%. 2 Are there any tax exemptions or deductions on components like HRA or medical allowance? Yes. For instance, medical expenses up to 10% of basic salary and HRA under certain conditions may be exempt. Provident fund, pension contributions, and zakat payments may also offer tax relief. 3 Which salary amount is credited to my bank account? Your net salary — gross salary minus deductions like tax, PF, and other withholdings — is what gets credited to your bank account.