What is a salary slip?
A salary slip or payslip is a document issued monthly by an employer to their employee, detailing the amount of pay, benefits, and taxes withheld.
The term may also be used in the singular form to refer to a single piece of paper or electronic record that has all the information on one employee.
A salary slip is generally issued at the beginning of a month, covering the earnings of the previous month. The salary slip generally contains information such as the name of the employer and employee, date, gross pay, deductions and net pay. There are many different online tools for calculations related to your salary. For instance, you can use a take-home salary calculator India to figure out how much of your salary package will you be actually taking home.
Wages paid in cash are not recorded in a salary slip.
The content of a regular pay slip is primarily divided into two sections namely the income and the deductions. We’ll try to understand the constituents of each of these sections here.
Basic, as the name suggests, is the fundamental component of your salary slip. It forms the major chunk of your pay package. This component is arrived at based on several factors such as your job profile, your qualification, experience, company policies etc. Your designation to plays an important role in fixing this component. It is a taxable component of your salary, which is used for calculating HRA (House Rent Allowance), medical allowance and Provident Fund deductions. Basic Salary is paid on monthly basis and it comprises 40% – 50% of your CTC (Cost to Company).
HRA stands for House Rent Allowance and it is a part of your salary which is paid to you by your employer to cover up a portion of your house rent expense. This component depends on where you live i.e., metro city or non-metro city and also your basic salary.
- Dearness Allowance (DA):
The Dearness Allowance is paid to employees as a cost-of-living adjustment allowance to offset inflation and cost of living increases, as announced by the government from time to time. DA forms about 20% of your basic pay.
- Conveyance Allowance:
Conveyance allowance is paid by companies to their employees towards travelling expenses for commuting from home to office and office to home daily. This component varies among companies and also depends on various other factors such as type of industry, the distance between workplace and residence etc.
- Medical Allowance:
Medical allowance is given by employers to employees for medical purposes for themselves or for their family members. Often companies have tie-ups with hospitals whereby employees can avail themselves of cashless treatment from those hospitals.
Special Allowances: Special allowances are additional payments made over and above your basic salary as defined in your contract of employment. Some examples include housing allowance, transport allowance and telephone allowance.
- Tax Deducted at Source
It is the amount deducted by the employer from your salary as per income tax slab rates. This is a mandatory deduction made by employers, who deduct this tax at source to avoid hassle for employees to pay tax at a later stage. Under Section 192 of the Income Tax Act, 1961, employers are required to deduct TDS on salaries before making payments in hand to employees.
- Professional Tax (PT)
Professional Tax is a state-level tax that is levied by states on professionals and salaried individuals. The rate of professional tax varies from state to state depending upon their rules and regulations.
- Provident Fund (PF)
This amount is deducted each month from your salary and deposited in your provident fund account. It cannot be withdrawn before you retire except in some cases where you have worked for less than five years. The employer also contributes an equal amount to that of an employee every month. You can use this money at the time of retirement or when you change your job.