It is a basic component of the entire salary benefits agreed to be paid by the employer to the employee. Usually, when a payroll contract is signed, gross salary is agreed based on basic salary and other allowances and these other allowances like house rent allowances, dearness allowances etc. are calculated based on the basic salary in most of the cases. Furthermore, various employee benefits like provident fund, gratuity, social security fund etc. are also calculated based on the basic salary. Therefore, basic salary plays a vital role to any individual whether to accept the employment opportunity or not.

Provident fund, also known as employee provident fund or PF, is a statutory fund established under the Employee Provident Fund act 2019 to protect the interest of employees working under the government as well as private sectors. Each month, 10% of the basic salary is deducted from the salary payable to employee and equal amount of contribution is to be made from the employer and total contribution 20% of the basic salary, i.e. 10% from employer and employee each, is to be deposited with the provident fund account opened & maintained on this behalf. There are few cases provided in the act in which provision of the act shall not apply. Total amount deposited in the account of an individual employee will be paid to the employee or his/her legal heir along with the interest, at the time of his/her retirement or death as the case may be. It may be noted that contribution to the provident fund either by the employee or employer is eligible expenditure to be reduced from the taxable income, subject to the limit, while calculating income tax as per the Income Tax Act, 2058.

Citizen Investment Trust also known as Nagarik Lagani Kosh in common, is a statutory body constituted under the Citizen Investment Trust Act, 2047. The main objectives of establishing the trust is to increase opportunities of investment by encouraging the general public for capital saving and to bring dynamism in the development of the capital market in Nepal. It operates and manages various types of retirement schemes, unit schemes and mutual fund programs for both domestic as well as foreign investors to encourage the people for saving in order to expand funds and increase the investment opportunities along with the dynamic development of the capital market to contribute economic development of the nation.

An allowance commonly known as bhatta is a money that is paid to an employee, in most of the cases, on a regular basis to meet his/her needs. It is agreed at the time of appointment. Generally, following types of allowances are in common. Dearness Allowances: It is paid to compete with the inflation. It is also known as Mahangi Bhatta. Generally, it is paid on a regular basis. House Rent Allowances: It is paid to meet the house rent expenses. Generally, it is also paid on a regular basis. Travelling Allowances: It is paid to meet the travelling expenses. Generally, it is paid before travelling and the person in receipt of such allowances shall furnish the details of expenses met out of the allowances after completion of the travelling. Meeting Allowances: Generally, it is paid to the director and member of the board of any body-corporate in lieu of their present at the meeting.

Taxable Salary represents such portion of the salary which is taxable in the hands of employee as per the Income Tax Act, 2058 and the regulations made thereof. It may be noted that not the whole amount of salary that is paid to the employee is taxable. Tax laws and regulations have provided various deductions and remedies to salaried employees before charging their salary income for income tax calculation. This deduction includes contributions made to provident fund, gratuity, social security fund, medical insurance, life insurance, etc. provided that these contributions shall be made to the approved fund/institutions only.