If the basic salary is high then it leads to higher tax liability and a lower deduction or exemption. The basic salary is fixed and taxable without any exemption or deduction. Hence, higher basic pay will have a direct effect on your taxable income and tax liability. Furthermore, the exemptions on house rent allowance HRA is dependent on the basic salary. So, if the basic salary is high then the exemption will be lower. Higher basic pay also leads to a higher HRA, dearness allowance, contribution to pension schemes, and provident funds.