A salary slip is a legal, financial document that you get from your employer as proof of the compensation that you receive from them. The salary slip contains various components of the salary, including base pay, allowances, deductions, etc.

The employee pay slip issuance is a legal requirement that needs to be fulfilled by the employer. Although it is essential for employers to provide salary slips to employees, a printed salary pay slip is not mandatory, you can download a salary slip online using HR applications and online modules. Also, in some organisations, the salary slip is sent to you via mail.

A monthly pay slip in India is proof of the employees’ income and also helps them to invest in tax*-saving instruments like PPF, NPS, and a life insurance policy.

Let us get into the details of the salary slips in India.

What is a Salary Pay Slip?

An employee salary slip is a document that has information pertaining to the salary that you receive from your employer. A payroll salary slip contains information about the gross salary and the break-up of the salary, including the deductions. An online pay slip is issued monthly after the salary is credited to your account.

What is a Employee Code?

The salary slip includes a employee code which is a unique number that helps the companies in identifying the employee at the time of crediting the salary. It is also helpful in identifying the employee when they leave the company. All important details of the employee including their name, contact information, title, as well as their working hours, salary, and benefits, are linked to the employee code.

Although assigning an employee code is not compulsory, it makes sense in bigger organizations. As a secondary confirmation of the employee’s identity, it reduces the risk of a mix-up if there are two or more employees of the same name working in the organization.

This employee code is mostly for administrative use, and the employee does not need the same. But, some companies tend to use your EPF number or NPS number in the employee code.

What is the Salary Slip Format?

The components of the salary slip include:

Allowances

• Basic salary
  
  

  The basic salary is the primary component of your salary. Other components of your salary are calculated as per your basic salary, which makes this an important aspect of your total salary. Basic pay is the base amount before any deductions, additions, bonuses, etc. are applied. It is a specific percentage of either your gross salary or your total CTC.
  
  

• House rent allowance
  
  

  The HRA or the house rent allowance is also one of the components of your salary slip. This constitutes some per cent of your basic salary and is computed on the basis of your basic salary.
  
  

• Travel allowance
  
  

  The travel allowance on the online pay slip includes any amount that is provided by the employer to cover-up travel expenses related to your job.
  
  

• Special allowance
  
  

  A special allowance in the online salary slip format is the remaining amount left under your total salary. You must know that this entire amount is taxable. If your employer offers a tax*-saving instrument like a free meal pass to you, then you must opt for that under this section of your salary.
  
  

• Dearness allowance
  
  

  The dearness allowance is the amount provided by the central government to their employees and pensioners as an adjustment for their cost of living. The allowance is calculated as a percentage of the basic pay to counterbalance the effects of inflation.
  
  

• Medical allowance: A medical allowance is a specific amount that the employer provides to employees as a component of the total salary to pay for their medical expenses.
  
  

Deductions

• Provident fund
  
  

  This part of your salary slip in India covers the contribution of the employee and employer towards a provident fund. It is a voluntary deduction for people who have a salary of more than ₹15000 monthly. The employer deducts a percentage from the basic salary monthly. Also, the same amount has to be deposited by the employer in the provident fund account of the employee.
  
  

  A provident fund is essential as it helps you save for retirement when you are working. This component of the payroll salary slip is exempt from taxes*. Also, the amount that you accumulate receives interest as per the rate decided by the government.
  
  

• Professional tax*
  
  

  This tax* is levied by some of state governments. The tax* is charged to allow the employee to work in that specific state in that specific profession. Under this component of the salary slip, the maximum amount that you need to pay is limited to ₹2500 annually. Thus, this tax* varies from one state to another.
  
  

• Gratuity
  
  

  This is also one of the most important components of your salary pay slip. Every employer in the country has to deduct this amount from your basic salary. The amount that is deducted goes towards the gratuity fund of the employee. The gratuity benefits that you receive depend upon the number of years of the employee in the company.
  
  

• NPS
  
  

  Contribution to the National Pension Scheme is compulsory for all employees of the Central Govt. except the armed forces. All state governments except West Bengal have adopted the National Pension Scheme for their employees. Employees in private organisations can also contribute to the NPS voluntarily and avail of a tax deduction. Also, employers can also contribute to the NPS account of their employees, as per the conditions of the employer.
  
  

• Income Tax*
  
  

  The income tax* on your salary is calculated after taking into consideration all the deductions and tax*-exemptions. It is calculated based on the tax* slab that the individual falls under. Also, it is one of the most complex parts of the salary slip in India.
  
  

  If you are looking to save taxes* by investing in tax*-saving schemes. One of the ways to do that is by purchasing a life insurance policy. If you are looking for the right life insurance policy, you can choose Tata AIA life insurance. The policy can be bought online and offline, depending upon your choice. With a life insurance plan, you can avail of a tax* deduction of a maximum of up to ₹1.5 Lakh on the premiums that you pay towards the life insurance policy under Section 80C of the Indian Income Tax Act, subject to conditions.
  
  

• Group health insurance or term insurance
  
  

  Any premiums paid towards the group health insurance or group term insurance are mentioned as deductions in your salary slip.
  
  

• Unpaid leaves
  
  

  If you have availed of any unpaid leaves during the year, the salary deduction will be mentioned under this section.

  
  
  

Conclusion

A salary slip is one of the most important documents that you need. It is not only proof of the income that you earn but is also essential in situations like availing of a loan or buying a life insurance plan. You can either opt for an online pay slip or get a printed one. The online pay slip format is similar to an offline pay slip, and it will cover all the components of your salary. While negotiating the salary, keep all the components in mind so that you do not face any hassles later. Moreover, invest in tax*-saving schemes so that you can reduce the amount of taxes* that you need to pay.

L&C/Advt/2022/Jul/1634