What are grade pay, basic pay, pay scale, allowances, DA, HRA, perks in salary system in India?
Grade Pay : Government employees receive grade pay which depends on the category/class of employee. Actually grade pay depends on the seniority and the position of the employee in the government.
Basic Pay :- This is the core of salary, and many other components may be calculated based on this amount. It usually depends on one’s grade within the company’s salary is a fixed part of one’s compensation structure. Many allowances and deductions are described in terms of percentage of the Basic Salary.
Pay Scale :- It is the range of the salary you are entitled to receive during your tenure in company. For eg :- If payscale is Rs( 5240-20000). Number1 , 5240 : It is the basic pay at which your salary is calculated when you are appointed. Number2 , 20000,: It is the maximum basic pay a person can receive in a designated post.
Allowance: It is the amount received by an individual paid by his/her employer in addition to salary to meet some service requirements such as Dearness Allowance(DA), House Rent Allowance (HRA), Leave Travel Assistance(LTA) , Lunch Allowance, Conveyance Allowance , Children’s Education Allowance, City compensatory Allowance etc. Allowance can be fully taxable, partly or non taxable.
DA(Dearness Allowance) :The Dearness Allowance(DA) is a cost of living adjustment to allowance. It is calculated as a percentage of (Basic pay + grade pay). Dearness allowance is updated every quarter of calendar year to compensate for inflation in consumer price index. It may increase or decrease depending on inflation rate. (Decrease in DA is rare).
House Rent Allowance :House rental allowance(HRA) is allowance paid for house rent. It depends city to city. Cities are classified as X, Y and Z, on the basis of their population, as recommended by Sixth Central Pay Commission in 2008. HRA is also used by the Indian Revenue Service(IRS) to provide income tax exemptions.
Other miscellaneous allowances : Miscellaneous allowance(MA) includes phone allowance, shift allowance, travel allowance etc.
It means salary will be calculated as (Basic + grade pay)+DA+HRA+MA. Presently, DA is around 110%, HRA may vary from 10% to 30% and MA can vary widely.
Assuming DA=110% HRA=20% MA=40%
I would take a example for calculation :-
Basic pay = 5200-3%-20200
Grade pay =1800
Gross monthly salary = (5200+1800)+(7000*1.10)+(7000*0.2)+(7000*0.4) = 18900
Your net salary (that is your in hand salary) will be a little less due to PPF and other deductions. It is about 15-20% roughly. So net salary will be around Rs. 16000 per month.