Learn How To Read The Components Of A Salary Slip (India)

Learn How To Read The Components Of A Salary Slip (India)

Every single month you get a salary slip. Very few people can understand. its intricate elements can leave anyone especially a novice perplexed. Although, to a seasoned employee the components of a salary slip can be easy to read and understand. However, it’s one of the big challenges for someone that just started.

Before we get into the components, let’s understand what a salary slip is.

What is a salary slip?

A salary slip is a breakdown of your income. Consider this as a bank statement in a way. This shows you what your total income components are. Along with that, what deductions took place before the final amount was credited to you. A salary slip or payslip is legal proof of income for an employee. It helps one understand their salary and components of it.

Employees either get a printed hard copy or a pdf file in an email. Format of salary slip may vary from company to company. It helps in maintaining the financial information of the monthly salary of the employee.

Differences between(CTC) cost to company and Gross salary/Net salary

Cost to the company (CTC) is the total amount spent by the employer on the employee. The CTC components are housing rent, conveyance Allowance, Gratuity, Medical expenses, EPF, and other allowances. while Gross pay is the number of money employees receive before any taxes and deductions are taken out. Finally, the net pay is the actual amount of salary employees take home after applicable deductions have been made. This is the money they have in their pocket (not literally) on payday.

Here are the components of a pay slip

The income part of your salary slip

  • Basic salary
  • Dearness Allowance
  • House Rent Allowance
  • Conveyance Allowance
  • Medical Allowances
  • Special Allowance & Bonus

Basic salary is the base income of an employee, comprising 35-50% of the total salary. Basic salary is determined based on the designation of the employee or the industry.

Dearness Allowance is paid to the employee so that they don’t have to suffer from market inflation and is provided to the employee by the employer to manage their expenses without much hassle.

House Rent Allowance or HRA depends on the city of residence of the employee. For a metro city, HRA is 50% of the salary and for non-metro cities, it is 40%of the salary. House rent Allowance is given to all the employees whether living in a rented place or owned. However, employees who are actually living on rent can benefit from tax exemption provided they are able to prove contribution to the rent towards the end of the financial year.

Conveyance Allowance is paid to employees to cover their transportation expenses occurred during when they commute to work. Conveyance Allowance is exempt from tax up to a specific limit. one can save income tax on conveyance Allowance.

Medical Allowance is a fixed that is given to an employee for medical expenditure. They don’t need to show the bills to substantiate these expenses.

Special Allowance & Bonus is not fixed and it is given to employees based on the performance or any other parameter discussed at the time of appraisal or hiring to keep the employee morale high. Generally, someone working in sales can see a higher bonus compared to someone working in customer service or support functions.

Deduction side of your salary slip

  • Tax deducted at source (TDS)
  • Employees’ Provident Fund (EPF)
  • Professional Tax

Tax Deducted at Source or TDS is the Tax that is subtracted at the time of transferring the salary from the employer’s end. The Finance Ministry of India lays down the guidelines for tax deductions at beginning of each financial year. This generally requires a complex calculation. You get a statement of tax deductions after the end of the financial year.

Employees’ provident Fund (EPF) is a minimum of 12%of the employee’s basic salary goes towards EPF. The employer also makes a similar contribution on behalf of the employees for their retirement. provident fund is the accumulation of funds for employees’ retirement period.

Professional tax is a small tax levied by the state government on earning professionals. It is payable only in a few states like Karnataka, West Bengal, Andhra Pradesh, Telangana, Madhya Pradesh, Bihar, Jharkhand, Tripura, Orissa, Meghalaya, Kerala, Chhattisgarh, Assam,  Gujrat, Tamil Nadu, Maharashtra. The amount of professional Tax is a few hundred rupees each month. It appears on the deduction side of your salary slip.


By and large, these are roughly the basic components of a salary slip and should be similar to most people working in different companies. However, some components may appear differently though. This is the basic salary slip structure and employees with higher benefits or at a superior level might see additional components listed.

An important piece of information to remember. When you have a question regarding your salary slip, always ask your immediate supervisor or a representative from that human resource. So, if you don’t want to lose your job, keep your salary slip a secret.

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9 months ago

I still don’t know what every component on my pay slip means and that is so bad. This post is super helpful. I guess it also depends from where you come from. Ours is different in terms of taxes. But, this is great.

Thank you for helping us understand more about our finances. 🙂

Diksha Singh
Reply to  ThatUnknownBlogger
8 months ago


9 months ago

Too good article.

Diksha Singh
Reply to  Pallavi
8 months ago


9 months ago

Helpful article

Diksha Singh
Reply to  Bhargavi
8 months ago

Thank you…

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