What Is an Employee Salary Slip? Format, Components & Tax Benefits

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2025-12-14

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A salary slip or payslip is a financial legal document that works as proof of the compensation you receive from your employer. It will show all the components of your salary including base salary, mandatory and temporary allowances, deductions, tax paid, etc.

A salary slip works as proof of income for employees. The particulars of a salary slip give you a clear picture of your income and can help you plan investment in tax-saving instruments like equity funds, PPF, NPS, and life insurance. Employers are legally required to issue salary slips to their employees. However, it is not mandatory to provide printed slips.

While most people are familiar with the components of salary slip, comprehending them can often prove challenging. To understand how your monthly net salary is calculated, it's essential to delve into each component of your salary slip. In this article, we'll explore the details regarding what is salary slip, payslip components, and its importance in tax savings.

Key Takeaways

A salary slip is a monthly document that provides a detailed breakdown of an employee’s earnings, deductions, and net salary
Salary slip acts as proof of employment, helps in income tax planning, supports loan/credit card applications, and assists in salary negotiations
TC includes all employer expenses, gross salary is total earnings before deductions; and net salary is the final amount received
Salary slips help employees estimate taxable income and optimise tax savings using deductions under sections like 80C, 80D, and 80CCD
Most companies provide salary slips digitally through HR portals, payroll systems, or email, with physical copies available on request

What is a Salary/Pay Slip?

An employee's salary slip is a legal document that an employee receives from their employer every month. A salary slip contains a detailed breakdown of an employee's salary from gross salary to the in-hand salary with deductions. A pay slip is issued every month after your employer provides your salary.

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What are the Components of a Salary Slip?

The primary component of a salary pay slip includes all the heads affecting your gross income. The heads are divided into Income and Deductions.

Let us understand these two sub-components in more detail:

Incomes:

The following salary slip content usually forms part of salary statement of the salary statement of employees:

Basic Salary: It is the primary component of your salary income. It is the basis of all other salary components, including the deductions. Under the new labour codes, employers must ensure that at least half of their total cost to company (CTC) is treated as “wages”, primarily basic pay plus dearness allowance, which effectively pushes basic salary closer to 50% of CTC.

Dearness Allowance: It is a part of the old corporate and government salary structures. It is meant to compensate against inflation. The dearness allowance is estimated as a percentage of the basic salary and is fully taxable.

House Rent Allowance: HRA compensates you for the monthly rental expenses for the house. This allowance is usually up to 50% of your basic salary. HRA is partially taxable based on your city of residence and rent paid.

Learn how to calculate HRA benefits here.

Conveyance Allowance: This is an allowance to compensate you for your daily office commuting expenses. Today, there is generally no separate blanket tax-free limit for regular conveyance allowance, because the earlier fixed exemption has effectively been merged into the standard deduction for salaried employees under the old tax regime; the allowance is usually taxable except for specific cases covered under Section 10(14) and related rules.

Medical Allowance: It is a fixed amount paid as part of your monthly salary and is fully taxable in your hands. Medical tax benefits now mainly come from health insurance premiums and specified medical expenses claimed under sections like 80D and 80DDB, rather than from this allowance itself

Leave Travel Allowance: It is also a partially taxable allowance that allows employees to claim tax exemption on domestic travel costs. This exemption is available only if you opt for the old tax regime; under the new tax regime, LTA is fully taxable as part of your salary. Employees can claim exemption for up to two journeys within a government-specified block of four calendar years (the current block is 2022–2025).

Special Allowance: Special allowance includes all the remaining part of your salary. This allowance is fully taxable, unless it is specifically exempted under Section 10(14) of the Income Tax Act.. There are two different categories of special allowance – personal allowance and official allowance.

Deductions:

The following components may show deduction amounts from your salary:

Provident Funds: Your contribution, along with your employer’s contributions to your provident funds like EPF or NPS, is shown as a deduction on the employee's salary slip.

Professional Tax: In Professional tax, a state tax applicable to certain professions. If it applies to your employment the deduction will appear on your pay slip.

Income Tax: Advance income tax deductions are part of your monthly salary. These deductions are based on anticipated income for the financial year. From AY 2025–26, employers typically compute TDS assuming the new tax regime as the default, unless you formally intimate that you wish to be taxed under the old regime and submit your investment declarations accordingly.

Unpaid Leaves: If you have taken any unpaid leave during the month, the deducted salary will appear under this heading.

Gratuity and Health Cover Premiums: Although not part of your income, employers often include employee benefit payments as part of CTC (cost to company). If so, the amounts are shown as a deduction on your salary slip.

Standard Deduction and Its Impact on Salary Slip

The standard deduction is a fixed amount that employees can reduce from their taxable income, directly impacting the net take-home salary reflected on the salary slip. Introduced to simplify the tax computation process, this deduction reduces the taxable portion of your income, making your overall tax liability lower. From FY 2024–25 (AY 2025–26), the standard deduction is ₹50,000 under the old tax regime and ₹75,000 under the new (default) tax regime, so if you opt for the new regime and the deduction is set at ₹75,000, this amount is deducted from your gross income before tax is calculated, resulting in a higher net salary.

Did You Know?

From 2025, your EPF auto-transfers on job change via your UAN, so your retirement corpus moves without any transfer request.

Source: Financial Express

Importance of a Salary Slip

Salary slips are an important document of your employment. It can help you with the following important activities in your life:

Works as a Proof of Employment: A salary slip is a readily available document to show your continued employment.
Becomes the Basis for Income Tax Payment: Different components of your salary will attract a different amount of tax. Your tax estimate for the financial year is based on the salary structure provided in your salary slips.
Helpful while Seeking Future Employment: Your salary at the new employer usually depends on your last drawn salary. Salary slips help you negotiate a better salary with the next employer.
Helps Avail Loans: Salary slips are an important document when applying for a loan. Your eligibility for the loan will depend on your salary structure and the money you receive every month.
Income Proof for Insurance and Credit Cards: You must show proof of income while purchasing life insurance, as your income defines your maximum life cover eligibility. Similarly, your credit card limit is also defined by your salary. Thus, a salary pay slip is an important proof of income and employment for both.
Helps in Income Tax Planning: Your salary slip is a crucial document for effective income tax planning. Providing a detailed breakdown of your earnings and deductions helps you understand your tax liabilities and explore ways to minimise them. Sections like HRA (House Rent Allowance) and LTA (Leave Travel Allowance), , under the old tax regime, and standard deductions available under both (with a higher amount in the new regime) enable employees to make informed decisions about investment opportunities and tax-saving instruments under sections like 80C, 80D, and others.
Facilitates Loan and Credit Card Applications: Financial institutions often require salary slips as proof of income when processing loan or credit card applications. Your salary slip demonstrates your earning capacity and repayment ability, which are critical factors in determining your eligibility. To evaluate your creditworthiness, lenders assess components such as gross income, net income, and any existing deductions or liabilities.
Proof of Employment for Various Purposes: A salary slip serves as formal proof of employment, widely accepted across various scenarios. Whether applying for a visa, renting a property, or completing background verification processes, this document acts as an official testament to your job status, income level, and consistency of employment.

Salary Slip Format

Employers in India do not follow a standard salary slip format. However, every salary payslip will generally contain certain information. Depending on the type of company and compliance, the salary statement of employees may contain the following information:

Month and Year of the Salary Paid
Employer’s Name, Address, UIN/CIN, TAN and PAN
Employee Name, Code, Designation and Department
Employee PAN and Bank Account Number
EPF Account Number and UAN (Universal Account Number)
Total Work Days and Number of Leaves
Classification of Earnings (income) and Deductions
Net Pay in Numbers and Words
Leave Balance

Difference Between Cost to Company (CTC) and In-hand or Gross Salary

Cost to company or CTC refers to the money spent by the employer for the benefits directly and only available to you. For example, CTC may include the following amounts:

Premium paid for the group health and life insurance coverage available to you and your family members
Premium paid for maintaining gratuity and leave encashment insurance plans
Employer’s contribution to your EPF or NPS retirement account

These amounts and similar expenses will form part of your CTC. However, these amounts are never payable to you directly. On the other hand, gross salary refers to the total amount of money payable to you as salary. This means all the cash allowances, your self-contribution to EPF or NPS, leave salary, etc. will be a part of your gross salary.

In-hand salary is the amount of money you finally receive after all the deductions. In-hand salary is what is reflected in your bank account statements. In-hand salary is also called net salary on the pay salary slip.

Example of CTC, Gross Salary and In-Hand Salary

The following table shows the estimates of gross salary, the cost to the company and net salary or in-hand salary. Remember the advance tax is estimated on a gross salary after allowing for deductions. Employer’s contribution to your NPS account can be claimed as a deduction under Section 80CCD(2) up to the prescribed percentage and limits, while EPF contributions by the employer are tax-exempt subject to overall caps on employer retirement contributions.

Income		Salary Slip Deductions Allowances
Basic	40,000	EPF/NPS Contribution	12,000
DA	10,000	Professional Tax	-
HRA	20,000	Health Insurance Cover	210
Conveyance	1,800	Advance Tax	5,500
Medical	15,000	Gratuity	310
Special Allowance	60,000	Unpaid Leaves	-
Employer's Cont. to EPF/NPS	2,000	Deductions Total	17,764
Total In (Gross Salary)	1,48,800	Net Salary (Payable)	1,30,410
Cost To Company (CTC)	17,85,600 P.A.

The employer may provide a special allowance for certain expenses you may incur in the course of your duties. Thus, the allowance is exempt to the extent of your expenditure.

Where Can You Find Your Salary Slip?

Salary slips are typically issued by employers on a monthly basis and can be accessed through multiple channels. Most companies provide digital copies via email or through dedicated HR portals or payroll management systems. Some organisations still issue physical copies upon request. If you are unsure where to find yours, contact your HR or payroll department for guidance.

How can a Salary Slip help you Estimate Tax Saving?

A salary slip has multiple types of components. These different components can be classified into the following three categories:

Fully-taxable
Partially Exempt/taxable
Fully Exempt

Any allowance that doesn’t fall in the partially or fully exempt category is fully taxable.

You will need to calculate the exempt amount of the partially exempt allowance, like House Rent Allowances (HRA), conveyance allowances, entertainment allowances, and special allowances. For such allowances, the exempt portion usually depends on the lower of the amount received and the amount actually spent or the specific limit notified under Section 10(14) and Rule 2BB, while any excess is fully taxable.

Fully Taxable	Basic Salary, DA, Medical Allowance, Special Allowance, Leave salary (received during employment)
Partially Exempt/taxable	HRA (applies only under the old tax regime), Conveyance/Transport Allowance (exempt only to the extent and in situations specified under Section 10(14) and Rule 2BB)
Fully Exempt	Employer’s PF/NPS contribution*, Employees contribution to PF/NPS

* Only exempt up to ₹7.5 lakhs per annum (combined cap for employer contributions)

Thus, a pay slip can help you estimate your taxable income for the financial year. If your taxable income is higher than ₹5 lakhs for the FY, you must consider tax-saving investments to reduce your tax liability, potentially to zero if it falls within the 87A limits. Under the new tax regime, where the rebate threshold and rules of deduction in salary slips are different, your salary slip still helps you compare how much tax you would pay under each regime and decide which option is more beneficial.

How Much Tax Can You Save?

The amount of tax you can save will depend on your net taxable income and applicable tax slabs. To reduce your tax liability, you will need to reduce your total taxable income by investing in tax-saving options.

The Income Tax Act provides multiple sections that list the specific expenses and investments leading to a reduction in taxable income. The most popular of these are the following:

Section 80C, 80CCC, 80CCD(1)	Unit Linked Insurance Plan (ULIP) Premium Term Life Insurance Premium Children’s tuition fee for full-time courses
Total combined limit is ₹1.5 Lakhs	Home loan repayment Contribution to PPF (Public Provident Fund), EPF (Employee Provident Fund) & NPS (New Pension Scheme) Investment in National Saving Certificates (NSC VIII Issue) 5-Year Tax Saving Fixed Deposits Investment in Equity Linked Savings Scheme (ELSS) Deposits into Sukanya Samriddhi Yojana (SSY) Purchasing Senior Citizen Saving Scheme (SCSS) Investment in Pension Plans from life insurers Infrastructure Bonds
Section 80CCD(1B) Additional ₹50,000	If you are contributing to NPS and your contribution exceeds 10% for salaried and 20% of your annual income for self-employed. Thus, using an NPS Tier-I account as retirement solution can increase your total eligible deduction under section 80C to ₹2 lakhs
Section 80D Up to ₹75,000	Available on Mediclaim and health insurance premiums Premium paid up to ₹25,000 for self, spouse and children is eligible for deduction If you pay the Mediclaim premium or bear the medical expenses of your parents in the previous year, you can claim up to ₹50,000 more
Other Investments & Expenses	Section 80DD: Money spent on caring for a person with a disability - ₹75,000 if 40-80% disability, ₹1.25 Lakhs for more than 80% disability Section 80DDB: Money spent on medical care for self or a dependent person suffering from a specified disease. ₹40,000 if aged below 60, ₹1 Lakh for seniors Section 80G: For donations to registered social and political organisations. (No deduction shall be allowed in respect of a donation in cash over ₹2,000)

You should note that the deductions from your CTC on the salary slip for health and life insurance do not fall under sections 80C or 80D. These are employer expenses and are not part of your taxable income. You can straightaway reduce your gross total income by the employer expenses included as deductions in your salary slips.

Maximise Your Tax Savings

The best way to maximise your tax savings is to maximise your savings. To maximise your savings, you need to follow the few old principles – invest first and spend later.

Appraisals and annual bonuses can suddenly push up your taxable income. While you may not have much control over these increases, you can still respond wisely by boosting your monthly savings and investments right away.

This will keep you ahead on the tax-saving curve and reduce your tax liability at the end of the financial year. And your salary slip is the best place to start. You can even get your salary restructured between allowances to maximise your exemptions.

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Conclusion

A salary slip is more than just a breakdown of your monthly earnings; it is a vital financial document with multiple uses. From simplifying tax planning and facilitating financial applications to serving as proof of employment, it plays a pivotal role in managing your professional and personal affairs. Always ensure you understand its components and keep it handy for various purposes.

Glossary:

EPF: A mandatory government-backed retirement savings scheme where employees and employers collectively contribute
NPS: A voluntary retirement savings scheme that provides subscribers with pension benefits managed by the PFRDA
Advance Tax: It is income tax you pay in instalments during the year, instead of as a lump sum at year-end
Section 80C: It allows individuals and HUFs to claim up to ₹1.5 lakh deduction on specified investments and expenses
Section 80D: It allows a tax deduction on eligible health insurance premiums and medical expenses for family members

FAQs on Salary Slip

You can ask your employer for a printed salary slip anytime during your employment. Alternatively, your employer may also share a salary slip with you every month via email which you can print.

Most mid-sized and large firms use employee management panels. You can access your profile on this panel with the login provided by the employer and download your latest salary slips from there.

Handwritten payslips are a rarity in today’s digital world. However, the slips can work if they have the signatures of the authorised signatory of your employer. But it is better to draft a salary slip on your computer and have it printed and signed by your employer.

Banks may ask for salary slips if you are applying for a loan, a credit card, or for KYC or similar purposes. Other than this, the bank that has your salary account may not ask you for your salary slips.

To create your own salary slip, you can use spreadsheet software like Microsoft Excel or Google Sheets. Start by listing all components of your salary, including basic salary, allowances, and deductions. Then, format the document neatly, ensuring clarity and accuracy in calculations. Finally, include necessary details such as employer information, pay period, and employee identification for a comprehensive and professional-looking salary slip.

To obtain a salary slip from your bank, you must typically request it through their online portal or by visiting the bank branch in person. Log in to your account online, check the section for statements or documents, and select the option to generate a salary slip. If you prefer in-person assistance, visit your bank branch and request a printed copy of your salary slip from a customer service representative.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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What are the Components of a Salary Slip?

Incomes:

Deductions:

Standard Deduction and Its Impact on Salary Slip

Did You Know?

Importance of a Salary Slip

Salary Slip Format

Difference Between Cost to Company (CTC) and In-hand or Gross Salary

Example of CTC, Gross Salary and In-Hand Salary

Where Can You Find Your Salary Slip?

How can a Salary Slip help you Estimate Tax Saving?

How Much Tax Can You Save?

Maximise Your Tax Savings

Conclusion

Glossary:

FAQs on Salary Slip

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