Salaried individuals receive a salary slip from their employers every month. It contains several details about your remuneration, including the gross salary and deductions. Check out this article to explore in detail about “what is salary slip,” its format, components, and more.
What is a Salary Slip?
Employers give a salary slip to employees after clearing their salary every month. The salary slip includes details about the net take-home pay, gross salary, and deductions. Therefore, the document works as proof of how much a person earns in a month. This document can be used to negotiate a better salary at a new workplace.
Who gets a Salary Slip?
Employers give a salary slip to all salaried individuals. The salary slip can be a digital or physical copy. Usually, you will get a salary slip every month from your employer. But some small companies might not give a salary slip to their employees. In that case, you can request a salary certificate from your employer.
Format of Salary Slip
The format of a salary slip will vary according to the specific organization. But a basic salary slip template will include the following:
- Company name, address, logo
- Month and year of the salary slip
- Employee name, code, designation, and department.
- The bank account number, Aadhaar, or PAN number of the employee
- Total number of working days and number of leaves
- List of deductions and earnings
- Net pay and gross pay in words and numbers
What are the Components of a Salary Slip?
The two primary components of a salary slip include earnings and deductions. Keep scrolling to understand what falls under income and deductions.
The earnings or income of a salaried individual include the following:
- Basic Salary: It is usually 35-40% of your total salary. Your base salary influences all the other components of your monthly earnings.
- House Rent Allowance (HRA): This amount is usually up to 40-50% of the basic pay and is useful for paying the house rent. The exact HRA amount will vary according to your location. Salaried individuals living in a rented house can claim a portion of the HRA as a tax deduction.
- Dearness Allowance: The DA is particularly applicable for government employees. The DA amount is a part of your basic pay to offset the effect of inflation. Since it is a taxable component, the DA needs to be mentioned during ITR filing.
- Special Allowances: These allowances are usually given to employees according to their performance. This component of the basic pay is also taxable.
- Other Allowances: Employers can also give various additional allowances to employees for different reasons. Usually, these allowances are mentioned under a specific head or categorized under one group named “Other allowances.”
The different deductions on a salary slip include the following:
- Employees Provident Fund: This is a compulsory deduction component in your salary slip. A minimum of 12% of your basic salary is directed to the EPF account. This deduction component on your salary slip enjoys tax exemption.
- Tax Deduction at Source (TDS): This is a specific amount deducted by the employer for the Income Tax department. Investing in tax-saving schemes and submitting proper documents can help with lowering the TDS amount.
- Professional Tax: This deduction is applicable only in some states. The professional tax amount varies according to individual tax slabs.
Impact of Standard Deduction on Salary Slip
The Union Budget of 2018-19 reintroduced the concept of standard deduction. Every salaried individual can claim a standard deduction of Rs 50,000. It helps in reducing the tax outgo for pensioners and salaried individuals. The standard deduction has been introduced to replace the medical reimbursement and transport allowance components in a salary slip.
Why is Salary Slip important?
The salary slip is important for individuals for the following reasons:
- Employment proof: A salary slip is legal proof of a person’s employment status. If you are applying for a visa or executive educational programs abroad, you can show the salary slip as proof of your designation and last withdrawn salary.
- Borrowing loans and credit cards: You can show the salary slip as income proof while taking a loan or credit card.
- Income tax planning: The different components of your salary have different tax implications. Understanding these tax treatments can help you find ways to increase tax savings.
- Seeking better employment: If you are interviewing at a new job, you will be able to negotiate your payscale on the basis of your last salary slip.
Salary Slip – FAQs
What is the Salary Slip?
A salary slip is a document given by employers to employees. It includes details about a salaried individual’s gross income, net income, deductions, and more.
Why is an understanding of Salary slips important?
You need to understand the different components of your salary slip to ensure that you are paid right at your job.
Why is a Salary Slip Important?
A salary slip is important for income tax planning and borrowing loans.
How can I check my salary slip?
Your employer will either give you a digital or physical copy of your salary slip.
What is the impact of Standard Deduction on Salary Slip?
Employees can claim an amount of Rs 50,000 as a standard deduction on the salary slip to reduce their tax.