Getting Started
Gross vs. Net Pay: What’s the Difference?
Gross Pay is the total earnings of an individual before any deductions are made. Net Pay is the amount which is calculated after subtracting any deductions such as income tax etc. from gross pay. This amount is then paid to the employee.
What are the statutory deductions from salary?
Statutory deductions are amounts payable to the government. This is mainly the income tax of an employee from his/her salary.
What is the optimized salary breakdown of an employee’s salary which will allow him/her to enjoy maximum tax benefit?
The optimized salary breakdown of an employee’s salary allows him/her to enjoy maximum tax benefits.
The gross salary is broken down into four basic categories: Basic Salary, House Rent Allowance, Conveyance Allowance and Medical Allowance.
It is calculated as follows:
- House Rent Allowance: BDT 300,000 or 50% of basic, whichever is lower is exempt from tax.
- Conveyance Allowance: BDT 30,000 per annum is exempt from tax.
- Medical Allowance: BDT 120,000 or 10% of basic, whichever is lower is exempt from tax.
In this way an employee can get up to a maximum tax exemption for income up to BDT 450,000 above individual tax-free income.