Under the Employees’ Provident Funds Act, 1952, PF is calculated on ‘PF wages’, which at minimum includes Basic Salary and Dearness Allowance. Zoho Payroll tags Basic as a PF-applicable component by default. If Basic exceeds Rs 15,000, the employer may cap PF contribution at Rs 1,800 (12% of Rs 15,000) or continue on actual Basic, depending on company policy set in Zoho Payroll’s PF settings.
The Payment of Gratuity Act uses Basic plus Dearness Allowance as the base for gratuity calculation: (Basic + DA) / 26 x 15 x years of service. Zoho Payroll uses this formula automatically when generating a gratuity report or processing a final settlement, provided Basic is correctly tagged.
Industry practice in India typically sets Basic at 40-50% of CTC for mid-level roles. A higher Basic increases statutory costs (PF, Gratuity) but reduces take-home due to higher taxable income. HR teams often calibrate the Basic percentage when structuring CTC offers to balance tax efficiency and statutory obligations.
Basic Salary is the fixed, taxable core component of a salary structure in Zoho Payroll. It drives PF contribution calculations, forms the base for HRA and Gratuity formulas, and appears as a separate earning line on every payslip.
There is no legal minimum ratio, but most Indian companies set Basic at 40-50% of CTC. A higher Basic increases PF and Gratuity costs. Zoho Payroll allows you to configure the percentage formula at the salary structure level so it applies consistently across all assigned employees.
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