Short answer: a salary slip has three zones – earnings (what your employer pays), deductions (what’s withheld before it reaches you), and net pay (what lands in your bank). The confusion almost always comes from three different numbers being called “salary”: your CTC (the annual package in your offer letter), your gross (monthly earnings before deductions), and your net (what you actually receive). For the same person in the same month those can be ₹49,200 / ₹45,000 / ₹41,800. Here’s every line, using one consistent example.
The sample payslip we’ll walk through
Ravi, a software support engineer in Pune. His offer letter says CTC ₹5.9 lakh. His April payslip:
| Earnings | ₹/month | Deductions | ₹/month | |
|---|---|---|---|---|
| Basic Salary | 25,000 | Employee PF (12% of Basic) | 3,000 | |
| House Rent Allowance | 10,000 | Professional Tax | 200 | |
| Special Allowance | 10,000 | TDS (Income Tax) | 0 | |
| Gross Earnings | 45,000 | Total Deductions | 3,200 |
Net Pay: ₹41,800
(Recreate this slip – or your own – in two minutes with the free Payslip Generator.)
The earnings side, line by line
Basic Salary – ₹25,000
The anchor of the entire structure. Almost everything else is computed from Basic: PF is 12% of it, gratuity accrues on it, HRA exemption is capped by a percentage of it, and leave encashment uses it. Employers typically set Basic at 40-50% of gross. A low Basic means lower PF outflow (more cash in hand today, smaller retirement corpus) and a lower HRA exemption ceiling; a high Basic does the reverse. This one number is a genuine financial-planning lever – see how shifting it changes everything downstream in the CTC Breakup Calculator.
House Rent Allowance – ₹10,000
Paid regardless of whether you rent. Its tax treatment is where it matters: if you pay rent and choose the old tax regime, part of it becomes tax-free under Section 10(13A) – the least of actual HRA, rent minus 10% of Basic, and 40%/50% of Basic. Ravi pays ₹12,000 rent in Pune (non-metro): his exempt HRA is the least of ₹1,20,000, ₹1,14,000 (1,44,000 – 30,000), and ₹1,20,000 → ₹1,14,000/year tax-free. Full worked examples in our HRA exemption guide, or compute yours in the HRA Calculator.
Special Allowance – ₹10,000
The balancing figure – whatever remains of gross after the named components. Fully taxable, no strings. If your slip shows a large Special Allowance and small Basic, your employer has optimised for lower statutory contributions; know what that trades away (see Basic, above).
Other lines you might see: Conveyance/transport allowance (taxable now, historically exempt), LTA (exempt only against actual travel bills, old regime, twice per 4-year block), bonus/incentive (taxable in the month paid – this is why one month’s TDS suddenly jumps), and arrears (back-pay; you can claim Section 89 relief so a lump sum doesn’t push you into a higher slab unfairly).
The deductions side, line by line
Employee PF – ₹3,000
12% of Basic (25,000 × 12% = 3,000), going into your EPF account. Not a cost – deferred savings earning 8.25% tax-free (within limits). Crucially, your employer contributes another ₹3,000 that never appears on this slip – it’s in the CTC, not the payslip (more below). Of that employer share, ₹1,250 goes to your pension (EPS, on the ₹15,000 wage ceiling) and the rest to EPF. Project what this becomes by retirement – it’s routinely ₹1 crore+ – with the EPF Calculator.
Professional Tax – ₹200
A state tax on employment, deducted by the employer. Maharashtra charges ₹200/month (₹300 in February, totalling ₹2,500/year); slabs differ by state and some states charge nothing. It’s deductible from taxable income. State-wise slabs: Professional Tax Calculator.
TDS – ₹0 (yes, really)
Income tax, estimated for your full year and deducted monthly. Ravi’s TDS is genuinely zero, and understanding why teaches you how TDS works. Under the new regime, his ₹5.4L gross is far below the ₹12.75L threshold where the Section 87A rebate wipes tax to nil. Under the old regime, his taxable income after the standard deduction, HRA exemption, professional tax, and his own PF (80C) comes to roughly ₹3.4L – below the old regime’s ₹5L rebate line, so also zero. TDS only appears on a slip once estimated annual tax is positive; when it does, it’s the employer’s estimate based on your Form 12BB declarations, trued up in January-March. If a bonus month suddenly shows TDS, that’s the annual estimate crossing the line, not an error. Verify any TDS figure against the TDS on Salary Calculator, and see which regime wins at your income.
Lines Ravi doesn’t have – but you might
- ESI (0.75% of gross): only if your gross is ₹21,000/month or less, in covered establishments. Ravi’s ₹45,000 gross puts him outside ESI. ESI Calculator.
- Labour Welfare Fund: a few rupees to a state welfare board, in some states, some months. LWF Calculator.
- Loan/advance recovery, salary advance adjustments: employer-specific; should always reference the original advance.
Why CTC ≠ gross ≠ net: reconciling Ravi’s ₹5.9 lakh
The offer letter said ₹5.9L. The bank shows ₹41,800 × 12 ≈ ₹5.02L. Where did ₹90,000 go?
| Component | Annual |
|---|---|
| Gross salary (45,000 × 12) | ₹5,40,000 |
| Employer PF contribution (3,000 × 12) – in CTC, never on the slip | ₹36,000 |
| Gratuity provision (≈4.81% of Basic) | ₹14,430 |
| CTC | ≈ ₹5,90,000 |
| Less: employee-side deductions (3,200 × 12) | -₹38,400 |
| Annual net (bank credit) | ₹5,01,600 |
Nothing “went” anywhere – ₹36,000 sits in his PF account, ₹14,430 accrues toward gratuity (payable after 5 years’ service), and ₹38,400 was his own PF savings plus professional tax. But this is why comparing job offers on CTC alone misleads: two ₹6L CTCs can differ by ₹2,000+/month in-hand depending on structure. Always convert an offer to monthly net with the In-Hand Salary Calculator before comparing.
Five things to check on every payslip
- PF number/UAN and PF amount – confirm 12% of Basic is actually reaching your EPF passbook (check on the EPFO portal; mismatches are common and easier to fix early).
- TDS vs your regime declaration – especially in April, when declarations reset.
- LOP (loss of pay) days – if you see a pro-rated gross, verify the day count.
- Year-to-date figures – YTD TDS on the March slip should reconcile with your Form 16.
- Keep every slip. Loans, visas, rentals, and job changes all ask for 3-6 months of payslips; reconstructing them later is painful.
FAQ
Is a payslip legally required? Broadly yes – state Shops & Establishments Acts and the Payment of Wages Act framework require wage statements for covered employees, and every organised-sector employer issues them as standard practice. If you’re not getting one, ask in writing.
**My employer shows employer-PF as my deduction – is that right?** No. The employer’s 12% is part of CTC, not a deduction from your gross. If it’s listed under deductions, your effective salary is lower than represented – query it.
Why did my net change this month with no raise? Usual suspects: February professional tax (₹300 in Maharashtra), a bonus pushing TDS up, declaration-proof deadline (January-February TDS true-up), or LOP days.
Payslip vs Form 16? The payslip is monthly; Form 16 is the annual TDS certificate your employer issues by mid-June, summarising the year. Your March YTD figures should match it.
Calculators referenced: Payslip Generator · In-Hand Salary · CTC Breakup · HRA · EPF · TDS on Salary · Professional Tax · ESI · LWF. Figures follow rules current at the time of writing; statutory rates change – verify for the current financial year. Not tax advice.
