Salary Slip

Ah, Salary Day! It’s fair to say that it is one of the happiest days of adult life when your phone lights up with the message: “Your account has been credited …..” or when you receive your paycheck. What many of us tend to ignore is the salary slip that comes along with the salary slip. The salary slip comes in handy to serve as your proof of employment and also to inform you with details of your salary(monthly compensation) and it’s accompanying salary deductions. It also serves as a vital document in approving your loan applications, as well as,  for credit card application.  Let’s try to understand the salary slip format, and what it means and conveys for salaried professionals. Of course, the values in the salary slip will vary employee to employee and also with their designation.

The salary slip is an important document for individuals so if your employer does not issue you a salary slip, it is your right to ask your employer to issue one. It is the written proof of your last drawn salaries. This comprehensive guide on the salary slip format will help enable you to understand the details of the payslip.

Types of Salary Slips

  • Manual Payslip
  • Computerized Payslip or E-Payslip

With regards to the type of salary slips issued first off in the era of papers and file type mode of running offices,  a manual salary slip used to prepared. These manually prepared payslips used to contain the company’s seal, the signature of the authorizing official as well as the logo of the company. However, issuing a manual payslip had always been a cumbersome process which consumed a lot of time, as well as, consumed a lot of paper.

Nowadays, with paperless offices technology and digitalization, the process for the generation of the salary slip has been automated. Computerized payroll or E-payslip has streamlined the process. On the date when the salary is credited, employers send out a  pdf file containing the payslip via e-mail. Employees are free to take printouts of the slips as and when they please. However, they can just use pdfs everywhere as proof of employment and for a loan application, credit cards etc.

This automated method of generating the payslip is faster, more efficient and also ensures the security of the data.

Importance of the Salary Slip

The salary slip will prove to be one of the most important transcripts for everything related to finances. The salary slip is a legal document. Any authority can ask for it as proof of your current/previous employment as well as assessing the financial well-being of an individual.  The salary slip gives important information about take-home salary as well as TDS on salary.

Learn more about TDS: TDS and TDS return types

Here are a few reasons why the Salary slip is important:

  •  The manipulation and tampering with the details in the particular salary slip are treated as a crime.
  • It provides a consolidated record of the monthly compensation, TDS and taxes levied
  • Salary slips allow you to take benefit of government schemes and services which are free or highly subsidised on the basis of the income.
  • Salary slips can be used to avail bank credit, house mortgage, loans as well as other types of lending by assessing the repayment capacity of the individual
  •  Salary slip can act as evidence/proof of employment
  • It conveys the message that a company had hired the individual as a permanent employee
  • Salary slips help you negotiate the compensation in front of your new prospective employers.
  • Authentic proof of income which can help file income tax return filing.
  • Acts as proof of PF (Provident Fund) as well as insurance and allowance deductions.
  • Salary slips help in performing background checks while changing jobs or while applying for higher education.

Components of a Salary Slip

Manual or e-slips for a salary within salary slip format has been deemed to be a valid proof document. As mentioned above any kind of tampering with details or misrepresentation is grounds for legal proceeding against the offender.

There are three basic components of a particular salary slip,

  • Income and exemptions
  • Deductions
  • Personal Details including leave information

Income and Exemptions

Income: It basically lists down all cumulative gains in the form of income of the individual related to the salary in one place. Generally located on the left side of the payslip

Basic Salary:  This basically comprises 40-50% of the individual’s total salary. This is the base salary on which the variety of amounts such as HRA, PF, Accommodation Prerequisite. This amount is entirely taxable

Dearness Allowance: Another basic component of the income and like basic salary this is useful in deciding the allowances as well as deductions. Entirely taxable as the basic income.

Performance Bonus: It is the compensation provided to the employees for exceptional professionalism and excellent job performance. This is taxable as well

Commision: Certain employees like the sales department are given compensation for increasing the turnover of the business and in accordance with the same some percentage of the turnover is awarded to the employees as commision. A commission is taxable as well.

Arrears: If a company pays any arrears (unpaid due) for any of the previous months of employment.

Overtime Compensation: If there is any kind of monetary compensation for the extra hours (overtime) that an employee dedicates to an organization, it is shown under the overtime compensation field.

House Rent Allowance:

The compensation given by an organization for monetary assistance for payment of the rent of his house is known as house rent allowance. An exemption is allowed on the house rent allowance. The monetary amount exempted is one which is the least amount  from the following:

  • Actual HRA received in hand
  • Rent – 10% of salary( basic salary + dearness allowance)
  • 50% of salary (basic salary + dearness allowance) for metros and 40% of salary ( basic salary + dearness allowance) for other than metros.

Leave Travel Allowance: Used to reimburse the money invested in travelling by the employee. The place of travel should be within the bounds of the country.

Child Education Allowance: Rs 100 per child per month up to 2 children. Annually ₹ 2400 of allowance.

Hostel Expenditure Allowance: Allowance to help professionals bear the cost of education. This allowance is given out as Rs. 300 per child up to 2 children. Therefore, in total, the employee gets ₹ 7200

City Compensatory Allowance: In case the employee has to relocate from their hometown to another city employers provide city compensatory allowance

Meals: If the employer provides meals, they are included in the meal allowance

Perquisites and Special Allowance: This includes all the allowances besides the ones already mentioned for perquisites including motor car allowance as well as accommodation etc. If paid, these will be mentioned in the salary slip in the prescribed salary slip format.

Deductions

Provident Fund: The provident fund includes a 12% deduction of the basic salary and the dearness allowance. This a two-way contribution made both by the employer and the employee. Only the contribution made by the employee is mentioned in the salary slip.

Professional Tax: This is a tax deduction levied by the state government on salaried professionals. The amount levied will differ from state to state.
Learn More about Professional Tax or go ahead and sign up for Professional Tax Registration

Tax Deducted at Source: (TDS) The tax amount deducted every month by the employer from salary submitted by the employer to the central government. Learn more about TDS.

Leave Information

It is a record of the number of days the employees have taken a holiday. It is most of the times displayed at the centre of the salary slip on top in accordance with the salary slip format.

Salary Slip Format

Indian Salary Slip

Here, we will look at the salary slip format of one employee named Musadilal Pyarelaal working in Office Office Pvt. Ltd.

Description Amount(in ₹ per month)
Basic Salary 16500
Dearness Allowance 6600
HRA 2000
Tiffin Allowance 1250
City Compensatory Allowance 120
Assistant Allowance 1500
Washing Allowance 200
PF Deducted 250
TDS 2500
Professional Tax 210

Here’s the salary slip of Musadilal:

Salary Slip Format

Salary Slip Format of Musadilal

Foreign Payslip Format

The foreign salary slip is as valid and as significant as it’s Indian counterpart. These salary slips can be presented in order to open up a bank account in any foreign banks.

Ways to increase take-home salary

Take home salary can be maximized in turn gaining maximum from the income. Here are two ways to increase takeaway salary.

  • Deduct the basic salary in a variety of long-term allowances and/or benefits. Deduction in basic pay reduces  HRA, PF contribution etc.
  • Allowances which are fully taxable should not be claimed in addition to this, you should include them in the partially taxable benefits or tax-free benefits.

The salary slip of the employee is a valid legal proof of the employment. It essentially gives an overview of the salary structure as well the taxes paid on a monthly basis. These components of your salary are a pivotal deciding factor for choosing a place of employment.