A quick guide to understanding your salary slip

What is a salary slip?

A salary slip refers to a physical or digital document issued to an employee by the employer. It gives information about the essential components of someone’s salary like HRA, LTA, Bonus paid etc along with the deductions for a specified period, usually a month.

The salary slip is generally issued on paper (hard copy) or e-mailed (soft copy) to the employee. Issuing salary slips is a legal obligation of an employer. This is because in addition to giving details about the salary it also works as proof of employment and salary payment.

A salary slip can also be called a Pay Slip/ Payslip.

What is the importance of a salary slip?

  1. It serves as the basis on which income tax to be paid is calculated. Hence it is fundamental in calculating the income tax returns and the tax payables.
  2. It gives access to different facilities. Many subsidised facilities provided by the government can be availed easily if you have a salary slip. Some such services include healthcare, subsidy in food grains
  3. Salary slips make it easy to avail, mortgages, loans and credit
  4. Most importantly since a salary slip is a legal document it can easily serve the purpose of being legal evidence of your employment at a company. 
  5. When you are looking for a new job, salary slips can help you negotiate salary with new employers. 

What are the components of a salary slip?

A salary slip gives you information about your salary and the associated benefits. In addition, you can also use it to know more about the available tax deductions. Here are some of the main components that make up a salary slip.

Income statements:

  1. Basic salary
  2. House Rent Allowance (HRA)
  3. Conveyance Allowance (CA)
  4. Special Allowance (SA)
  5. Cost to Company (CTC)
  6. Dearness Allowance (DA); is only for public sector employees
  7. Medical Allowance (MA)
  8. In-hand salary


  1. Professional tax
  2. Tax Deducted at Source (TDS)
  3. Employee Provident Fund (EPF); is only for private-sector employees

Difference between CTC and in-hand salary

CTC (Cost to Company) and in-hand salary are two different figures. The sum of money that the employer pays to the employee is known as CTC, or cost to the company. It includes HRA, medical benefits, gratuity and other allowances. The CTC depends on various factors like the position of a person, experience and skills.

The basic salary, which is also termed as gross salary is the amount that you receive before tax deductions and other allowances are accounted for. The other allowances include house rent allowance (HRA), medical reimbursement (MR), children’s education allowance (CEA), EPF contribution, leave travel allowance (LTA) and others. Additionally, the employer also subtracts gratuity and PF. 

The final paycheck or net salary or in-hand salary is what you receive after all deductions are done. Usually, this amount is lower than the basic salary or the gross amount. In the case of taxable income, it’s higher due to tax deductions at source (TDS). If you are confused with the calculations you can simply use a take-home salary calculator India 2020-21 as these are highly accurate. Click here to know more.

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