A person who doesn’t have savings, investments, tax saving plans, and backup plans is just one rainy day from being bankrupt or dependent on borrowings. Only through a planned budget can you create all these plans for yourself in a well-suitable manner. And knowing and keeping track of your finances is the first step toward managing your budget.
If you are a salaried employee who gets a salary pay slip every month, it is a plus to have a readymade list of income. It will help you realize most of the income in your budget. So understanding what is salary slip is necessary. Here you will learn about employee salary slips and their format, components, importance, and how to check salary slip online.
- Definition of a salary pay slip.
- Detailed information on salary pay slip components and their format.
- Importance of having a salary pay slip.
What is a Salary Slip?
An employee salary pay slip is a document that an employer provides their employee against a monthly salary. It is a receipt of all the salary components, which includes allowances and taxes. It also contains several important information about employment and invested pension schemes. Usually, the cost-to-company is much higher than the cash in hand. So an employee salary slip helps know the deductions in the salary and the particular taxes you pay. Employers provide a hard copy of the salary pay slip, usually only half an A4 paper in size. But nowadays, most employees provide salary pay slips online, through the company’s employee mobile application or website. It makes accessing and storing the information of monthly income much more convenient. It is the responsibility of the employee to keep a record of these salary slips.
Employers provide a hard copy of the salary pay slip, usually only half an A4 paper in size. But nowadays, most employees provide salary pay slips online, through the company’s employee mobile application or website. It makes accessing and storing the information of monthly income much more convenient. It is the responsibility of the employee to keep a record of these salary slips.
A salary pay slip is mandatory according to The Minimum Wages (Central) Rules, 1950, and was primarily applicable to skilled and unskilled labor. While the employee receives a salary pay slip, the employer has to manage a play register. It has the exact details as mentioned in the employee salary slip. While providing the pay slip, the employer takes the employee’s signature on the salary slip and in the register every month. The signatures are usually across a one-rupee revenue stamp.
As per rules, the employer has to provide a salary pay slip at least one day before disbursing the payment. It helps the employee to call out any discrepancies in the amount of the components.
What are the Components of a Salary Slip?
In India, there has been a positive increase in the salary earned by employees from 2018 to 2022. In 2021 the increase was 8%, and the expected increase in 2022 is 9.3%. As the salary increases, people must also record the increases in their basic components of the salary.
An employee salary slip has several components which add and deduct money to the final cash-in-hand, taxes, pension schemes, and allowances. Below is the list of all the major components you can find in a hard copy or salary pay slip online.
Earning Components of a Salary Pay Slip
Basic Salary: Basic salary is the major component of a salary pay slip, and as per the new wages code must constitute at least 50% of the total salary. The basic salary is fully taxable, so your taxes mainly depend on the basic salary.
Dearness Allowance (DA): DA is an extra allowance the employer provides for the cost of living and daily expenses. It is also a fully taxable component in the employee salary slip.
House Rent Allowance (HRA): HRA is for the sole purpose of paying house rent and has tax exemption while filing ITR. It is also valid for employees paying off home loans. However, if a person is not living on rent, this component becomes fully taxable.
Conveyance Allowance: Conveyance allowance is an extra payment that the employer provides for transportation to the work location. It is mainly dependent on the current transportation and fuel charges.
Travel Allowance (TA): TA is applicable when the employee has to travel to places for the employer. So the employer repays all the charges incurred during the travel through TA.
Medical Allowance: Medical allowance is for the regular health checkups, hospitalization, and medical costs that the employee may need.
Special Allowance: Special allowances may include any particular allowance the employer wishes to provide the employee for their performance. It can also include the commissions earned and any festive or financial bonuses.
Deduction Components of a Salary Pay Slip
Professional Tax: Professional tax is applicable for employees working in a specified field. These include a variety of employees, from factory workers to high officials. The state government decides the professional tax amount. Like most taxes, it is not a percentage tax but rather a fixed amount.
There are different professional tax slabs for different salaries. A minimum wage salary usually doesn’t have professional tax. But as the salary increases, the professional tax also increases to the highest rate. Currently, all states have the highest professional tax rate of around INR 200 per month.
Tax Deducted at Source (TDS): TDS is the tax your employer deducts from your salary if your salary crosses different income tax slabs. However, you can claim a rebate if you file ITR and prove that your taxable income was lower than your earned income. The TDS rates are similar to the Income Tax rates for different slabs.
Provident Fund (PF): Provident Fund is a pension scheme for employees to save money for their retirement. This amount deducted as PF is usually 12% of the salary. A plus point of PF is that the employer also contributes the same amount or a decent amount to your PF account on your behalf.
Usually, the employer creates an Employees’ Provident Fund (EPF) account for you. But there are different PF schemes like GPF, PPF, VPF, and EPS, which provide similar, but not so high, returns as EPF.
Employees’ State Insurance Scheme (ESIC): ESIC is an insurance scheme for employees. They can take health cover benefits through ESIC hospitals and mortality cover in case of a sad demise. ESIC deduction is currently around 3.25% of the salary, and the employer also contributes a portion to this scheme. Though ESIC is mainly applicable to factory workers, other professionals can benefit from it if their salary is below a specific limit.
Miscellaneous: As per the rules, the employer cannot make any other deductions in employee salary apart from the taxes from the government. However, in some cases, especially damages to establishment property, they can levy it from their employee through the miscellaneous deduction.
Did You Know?
Did you know that an employee can have more than one salary pay slip? Yes, they can. As long as the employers don’t have a problem, an employee can work in different organizations or even different branches of the same company. And they get a salary pay slip from every employer. The income generated through all the salaries is their final income while filing ITR.
Salary Slip Format
Apart from the earning and deduction components, a salary pay slip also has other crucial information regarding the employee. The wages code also states all the necessary components of a salary pay slip should have in their rules. You can understand those from a sample salary slip given below.
|XYZ Company Pvt. Ltd.|
|Salary Pay Slip for April – 2022|
|Employee Name:||No. of Working Days:|
|Employee Code:||No. of Present Days:|
|Department:||CL Taken / Balance:|
|Designation:||SL Taken / Balance:|
|Reporting Officer:||EL Taken / Balance:|
|Bank Account Details:||UAN Number:|
|SR. No.||Salary Head||Amount (INR)||SR. No.||Salary Head||Amount (INR)|
|1||Basic Salary||1||Professional Tax|
|2||Dearness Allowance||2||Tax Deducted at Source|
|3||House Rent Allowance||3||Provident Fund|
|Gross Salary for April|
|CTC for April||Total Deduction|
|Net Salary (CTC – Deduction)|
|Company Seal and Authorized Signatory||Employee Signature on Revenue Stamp|
Importance of a Salary Slip
There are several benefits an employee gets from obtaining a salary pay slip online or in a hard copy. Not only do they get to know the essential components of the salary, but its use is beyond the employment in the present organization. Below are a few points that describe the importance of having employee salary slips.
- A salary pay slip is also a legal proof of employment as it includes essential employee information.
- A salary pay slip is necessary to show legal proof of previous CTC while shifting employers.
- It is necessary for your budget and income tax planning.
- While taking home, vehicle, or personal loans, the bank usually asks for a salary pay slip to verify if you have the income to pay the EMIs.
- You can also get the benefits of various schemes by providing the salary pay slip as proof of employment and salary.
Word to Remember
CTC – Cost-To-Company is an often misinterpreted amount during salary negotiations. Potential candidates think that this is the amount they will get in a year during their employment but it is far from the truth.
CTC is only the gross amount of all the incomes, which doesn’t include the tax deductions. Net salary is the resultant of CTC with a subtraction of the deductions. So, the net salary is what you will get in hand every year. So while negotiating salaries, always find out the net salary and not the CTC.
Now that you know what is salary slip, its components, and its importance, you can confidently move ahead with the budget planning. With the help of the employee salary slip, you can get all the necessary details to invest in various plans to include in your portfolio for backup and investment purposes. And if you know how to check salary slips online, you can quickly obtain them within minutes. So, make use of salary pay slip online to increase the benefits of this essential tool further.
A salary pay slip is a document that shows all the details about earnings and deductions in an employee’s salary.
You can check salary slips online through your employer’s website, LAN network, or mobile application.
Yes. Checking salary pay slips online is convenient for viewing and storing them.
Yes. Having a salary slip proves the employment status because of its information and the company seal and signature.