Tools To India
Finance

How to Read Your Salary Slip

A payslip has two columns and about a dozen lines. Knowing which are yours, which are the government’s and which are neither takes ten minutes to learn.

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The short version

  • Earnings and deductions are two separate columns; net pay is the difference.
  • Basic salary drives PF, gratuity and the HRA exemption.
  • Special allowance is a balancing figure with no rules attached.
  • Check PF, professional tax and TDS on every slip — errors do happen.

The earnings side

The earnings side
LineWhat it isWhy it matters
Basic salaryThe core component, usually 40–50% of CTCDrives PF, gratuity and the HRA exemption limit
Dearness allowanceInflation-linked component, common in government and PSU payCounts with basic for PF and gratuity
House rent allowanceUsually 40–50% of basicExempt under section 10(13A) if you pay rent — old regime only
Conveyance / transport allowanceTravel componentLargely folded into the standard deduction now
Special allowanceThe balancing figureFully taxable, no rules attached — it is whatever is left
ReimbursementsFuel, phone, internet against actual billsNot taxable if genuinely reimbursed against bills
Variable pay / bonusPerformance-linkedPaid only if targets are met, often annually — never budget on it

The deductions side

  • Employee provident fund — 12% of basic plus DA, or of the ₹15,000 ceiling if your employer applies it. This is your money going into your EPF account.
  • Professional tax — a State levy, capped at ₹2,500 a year by the Constitution. Several States do not levy it at all.
  • Income tax (TDS) — tax deducted at source, spread across the year by your employer based on the regime and investment declarations you gave them.
  • ESIC — applies only below a wage threshold; contributes to State insurance benefits.
  • Loan or advance recovery — if you have taken one from your employer.

Three things to check every month

  1. PF. Confirm it is 12% of basic plus DA, or of ₹15,000 if capped. Then check the amount actually reached your EPF passbook — a deduction on the slip is not proof the employer deposited it.
  2. TDS. If it is zero all year and then very large in the final quarter, your investment declarations were probably not recorded. Fix it before March.
  3. Professional tax. If your State does not levy it and it is being deducted, ask.

Why two people on the same CTC take home different amounts

Because the split is decided by the employer, and there is no standard. A higher basic means more PF from both sides and a larger gratuity provision — good for long-term savings, less cash now. A lower basic does the opposite.

This is why comparing two offers on CTC alone is close to meaningless. Ask for the detailed structure: what percentage of CTC is basic, whether PF is on capped or full wages, and what sits in variable pay.

Frequently asked questions

What is special allowance on my salary slip?
It is the balancing figure — whatever is left after basic, HRA and other defined components are set. It is fully taxable and carries no exemption or benefit. A large special allowance usually means a low basic, which means less PF and a smaller gratuity.
Why is my employer’s PF contribution not on my payslip?
Because it is not paid to you. It is part of your CTC and goes directly into your EPF account, so it appears in your EPF passbook rather than your salary slip. The same applies to the gratuity provision.
My TDS jumped in January. Why?
Almost always because investment proofs were not submitted or not recorded. Employers deduct lightly early in the year based on your declaration, then catch up in the final quarter once proofs are due. Submit them on time and the deduction stays even.

Sources

Every figure on this page is traceable to the official source below. If a source has changed since the date shown, please tell us and we will correct it.