A salary slip or pay slip is a document containing a detailed list about the various components of your salary along with specific details of employment. It is issued every month by an employer either in the form of a printed hard copy or an electronic copy. Ideally a pay slip must contain a company logo along with company name and address.
Who gets a Salary Slip?
A salary slip is only available to salaried employees and your employer is responsible for providing you a copy of your pay slip every month. Some smaller companies might not regularly provide a salary slip and in such cases, you can ask your employer for a Salary Certificate. While most employers provide digital pay slips, other might provide physical copies of the same.
Format of Salary Slip
Different companies follow different formats of salary slips. Following is a basic template for a salary slip includes the following:
- Company name, logo and address, Salary Slip month and year
- Employee Name, Employee Code, Designation, Department
- Employee PAN/Aadhaar, Bank Account Number
- EPF Account Number, UAN (Universal Account Number)
- Total Work Days, Effective Work Days, Number of Leaves
- Itemised list of Earnings and Deductions
- Gross Pay and Net Pay in numbers as well as words
Salary Slip Sample
The following is a salary slip sample:
The above format is just an illustrative example and your salary slip may include or exclude some of the components shown in the example.
What are the Components of a Salary Slip?
1. Income/ Earnings
- Basic Salary: This comprises 35% to 40% of your salary, thus it is perhaps the most important component of salary. It also serves as a basis for determining the other components of salary.
- Dearness Allowance (DA): Calculated as a percentage of your basic pay, DA is given to offset the impact of inflation. It is completely taxable and need to be declared while ITR filing. This pay slip component typically features in case of government employees.
- House Rent Allowance (HRA): It is an allowance to help people pay their house rent. The amount of HRA depends on the location and ranges between 40%-50% of basic pay. You can claim a part of the HRA as a tax deduction, provided you live in a rented house as per Section 10 of the Income Tax Act, 1961.
- Performance and Special Allowance: This is given to encourage employees for a better performance. This component is completely taxable.
- Other Allowances: This comprises the various additional allowances paid by an employer for any reason. An employer may categorize such allowances under a specific head or group them as “Other Allowances”.
- Employees Provident Fund (EPF): This comprises a compulsory deduction in your salary slip. This component of your salary slip is at least 12% of your basic salary and diverted to an EPF account. Notably, your contribution towards the EPF is exempted from tax as per Section 80C of Income Tax Act.
- Professional Tax: This pay slip component is levied on all individuals, including the salaried, professionals and traders who have an income. It is levied in some states only and calculated on the basis of an individual’s tax slab.
- Tax Deductible at Source (TDS): It refers to the amount of tax deducted by your employer on behalf of Income Tax department. You can reduce TDS by investing in tax-saving schemes and submitting the appropriate documents to your employer.
Impact of Standard Deduction on Salary Slip
Standard deduction was reintroduced in the Union Budget 2018-19 by the then FM Arun Jaitley. A sum of Rs. 50,000 (increased from Rs. 40,000 in the Budget 2019-20) can be claimed as a standard deduction by the salaried employees, thereby reducing the tax outgo for salaried and pensioners. This has replaced the transport allowance and medical reimbursement components in the salary slip.
Why is Salary Slip important?
- Income Tax Planning: You salary contains various components such as Basic, HRA, transport allowance, medical allowance, leave travel allowance, etc. that might have different tax treatments. Knowing the value of separate components can form the basis for maximizing your income tax savings for the applicable financial year.
- Proof of employment: This document serves as a legal proof of employment. While applying for visa or to executive programs at various universities, you may have to submit copies of your pay slip, as a proof of your last drawn salary and designation.
- To avail loans/ credit card: Your pay slip contains details of your monthly income which is a key factor that determines your ability to meet your debt obligations. Thus, your salary slip is important while applying for credit card, loan, mortgage and other borrowings.
- For seeking further employment: Knowledge about the various components of your salary slip can help you assess other job offers. Moreover, it forms the basis of salary negotiations when applying for a new job.