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An employee salary slip is a document provided by the employer to his or her employee upon receiving income every month and includes details of the salary breakdown like basic salary, medical allowance, conveyance allowance, and deductions. The exact format of salary slips may vary from one company to another, but here’s a basic salary slip template that usually includes the following information:
Company name and address
Salary slip date
Employee name, designation, department and code
PAN or Aadhaar number of the employee
Employee’s bank account number and bank name
EPF UAN (Universal Account Number)
The total number of days worked and the number of leaves taken
Details of income earned and list of deductions
Net pay and gross pay in numbers as well as in words
Employees can be provided with a salary slip format in word or a salary slip format online and includes basic information like company name, employee name, designation, employee code, etc. Before we jump to the various components of a salary slip.
The components of a salary slip can be broadly divided into two parts: income and deductions. Let’s take a closer look at each of these categories.
The income section includes any component that is credited to your salary account. Some common items included in this section are outlined below.
Basic Salary: This is a fixed component of your income that makes up around 35% to 40% of your total salary. It is used to calculate various variable allowances like the dearness allowance and the house rent allowance.
Dearness Allowance (DA): The dearness allowance is a monetary benefit paid to employees working in the public sector. It is offered to help employees manage the rising costs of living on account of inflation over the years.
House Rent Allowance (HRA): The house rent allowance is a benefit paid to employees to help them pay for rental accommodation. Depending on the amount of HRA paid, the allowance may offer partial or complete tax exemption to the tune of the least of the following:
Actual HRA received
Actual rent paid minus 10% of the salary
50% of the basic salary (for employees living in metro cities) or 40% of the basic salary (for employees living in non-metro cities)
Leave Travel Allowance (LTA): This is an allowance paid by employers to compensate employees for travel expenses incurred during a period of leave. It also offers tax exemption benefits on the actual travel costs incurred. The LTA exemption is available for two journeys taken in a block of four calendar years.
Special Allowance: This allowance is paid to employees to cover certain specific costs and expenses. The amount paid and the costs eligible may vary from one employer to another.
Performance Bonus: A performance bonus is paid to employees who have achieved certain predetermined goals or demonstrated excellence in other ways. This helps encourage the recipient as well as other employees to perform better at work.
This component contains any amounts that may be deducted from the total income earned. Some common deductions are listed below.
Professional Tax: In some states in India, professional tax is deducted from the employee’s salary. The amount of tax depends on the employee’s tax slab.
Employees’ Provident Fund: This deduction is made as a contribution towards the employee’s EPF account. Employees contribute 12% of their basic salary to their EPF account, and the employer matches this amount. The employee’s contribution to EPF is tax deductible u/s 80C of the Income Tax Act, 1961.
Tax Deducted at Source (TDS): TDS is deducted from the salary based on the employee’s income tax slab, and the net salary after deducting tax at source is paid to the employee.
A standard deduction benefit to the extent of ₹40,000 was introduced for salaried employees in Budget 2018 by the then Finance Minister Arun Jaitley. This benefit replaced the tax benefits on the conveyance allowance (up to ₹19,200) and the medical allowance (up to ₹15,000) paid to salaried employees. In the Interim Budget 2019, the standard deduction limit was increased to ₹50,000. This deduction reduces the total taxable income and the overall tax liability for salaried individuals.
The fundamental difference between CTC and gross salary lies in the salary structure of a company. CTC is the overall amount that an employer spends on hiring and reimbursing for an employee’s services in a given year. It includes all the allowances and deductions on the salary of an employee. The gross salary, on the other hand, is the salary that an employee gets before any deductions like EPF and gratuity is applied.
Here is a quick look at all the taxability details on the components of salary slip:
Pay slip components |
Taxable/Non-Taxable |
|---|---|
Basic pay |
Fully Taxable |
Dearness Allowance |
Fully Taxable |
City Compensatory Allowance |
Fully Taxable |
Special Allowance |
Fully Taxable |
Conveyance Allowance |
Partially Taxable |
Allowances paid by Government to employees posted abroad |
Non-Taxable |
Allowances accorded to UN workers |
Non-Taxable |
Compensatory Allowances remitted to judges of Supreme court and High court |
Non-Taxable |
Understanding the salary slip is imperative as it helps in knowing one's salary and the various list of components applied. Also, the salary slip is an important document to file IT returns, is an important proof of employment as well as helps in applying for loans.
The most generic salary slip format includes the company name, logo, employee name, designation, department, ID number, PAN, bank name, and account number along with the PF account number. The format also states the number of days worked and leaves taken by the employee. There will be a list of earnings and deductions along with the gross and net pay.
One can usually download the salary pay slip from the company’s salary slip platform by clicking the salary slip button.
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