Credits- Betterplace
A salary slip, also known as a Payslip, is a document that details an employee’s monthly salary. It is issued on a monthly bases. It is provided to the employees as a soft copy or as a hard copy.
Salary slips are essential to document since it is used for a few crucial functions. Some examples of such are applying for a loan or a new credit card. While these are some critical places, one must understand that salary slip is crucial.
Credit- HRCABIN
What is the importance of understanding the Salary slip / Payslip format?
One must still appreciate its structure and format and understand the format as it helps –
- One could choose wisely from other received job offers.
- One is assisted and could save a lot of earnings if the deductions are used well to optimise tax liability.
- One also understands the division of their salary to other sub-parts of a salary like EPF, ESI and many more.
It is comprised of the following format-
- Heading- The companies name
- Date- The Salary slip / Payslip dated on
- Name – The Name of the employee
- Designation – The designation of the employee
- Location – the location of the employee
- Department – the department of work
- Bank Name – The bank in which the employee’s account is present.
- Bank account number – Employers registered bank account number.
Then divided into two sections, one of earnings and one of deductions.
Earning section includes-
- Basic Salary
- Dearness Allowance
- House Rent Allowance
- Conveyance Allowance
- Medical Allowance
- Special Allowance
While the deduction section includes-
- Professional tax
- Tax Deducted at Source
- Employee Provident Fund
Let’s look in detail at what all these sections and subsections mean for the Salary slip / Payslip –
Incomes: The part shows all the hard-earned earnings an employee earns. The following section includes-
Basic salary- It is the essential salary component, which consulates 35 to 50 per cent of the total salary. In earning years of employment, this component is high, but as one progresses, the component decrease as other components add on. This percentage of salary is 100 per cent taxable and has to be paid.
Dearness Allowance- This allowance acts as a shield to the employee, protecting them against rising prices and inflation. As with time, the cost of living increases, and dearness allowance is paid by the government to its employees. Of the total salary, it is almost 30 to 40 per cent. Dearness Allowance is also taxable.
Types-
- Industrial Dearness Allowance (IDA)
- Variable Dearness Allowance (VDA)
House Rent Allowance- is the allowance provided to employees living on a rented base. The allowance is 50 per cent of the basic salary for people living in metro cities. While for all other cities, the allowance is 40 per cent of the basic salary. Tax is exempted on this till a specified limit, till the employee pays the rent.
Conveyance Allowance- As the name says, this allowance is provided to employees if they employ to travel from one place to another. This amount is not taxable to a specific limit.
Medical Allowance- It is the amount provided to the employees over any medical expenditure. The amount will be fully provided only if the medical bills for the same have been submitted to the employee. The amount is also not taxable only if the bills are provided, allowance of up to 15,000 rs.
Special Allowance- These allowances are like bonuses that are given to employees based on their performance. These allowances are 100 per cent taxed.
Deductions: As the word means, this is the amount that is reduced from the employee’s total earnings. It includes-
Professional Tax- It is a tax that the state government charges on professional earnings. It is not changed in all the states. The states that charge the amount are Karnataka, West Bengal, Andhra Pradesh, Telangana, Maharashtra, Tamilnadu, Gujarat, Assam, Chhattisgarh, Kerala, Meghalaya, Orissa, Tripura, Jharkhand, Bihar, and Madhya Pradesh. The amount is generally very low, around a few hundred rupees charged monthly.
Tax Deducted at Source- It is the amount that is reduced by the employer of the employee’s income on behalf of the income tax department. One can minimise income tax by investing in equity funds (ELSS), PPF, NPS, and tax-saving FDs.
Employee Provident Fund (EPF)- 12 per cent of income is transferred to the employee provident fund. The funds are accumulated and provided to the employee at the time of their retirement.
Why is Salary slip / Payslip Important? What is included in it?
- Income Tax Planning- The salary slip contains all the divisions of your earning and areas of deductions; knowing all these details will help one in tax planning. It will help save a huge amount of income and reduce taxes by using tax-saving investments.
- Proof of employment- The salary slip acts as a legal document proving your employment. This document is used at various placing like applying for colleges, new jobs etc. It is used for background checking the person applying.
- To avail of loans/ credit cards- Banks use salary slips to check the person availing of the loan’s financial conditions before providing them with a loan through salary slips. Salary slips are used not only for getting loans but also for credit cards.
- For seeking further employment- For future jobs, it is used to check and plan the new CTCs for companies. Before giving a certain CTC, companies compare and check the prospective employees’ old CTCs.
Hence, a Salary slip / Payslip is an essential and valuable legal document used in multiple applications worldwide. Therefore, it is not something to be taken lightly or spoiled around.
How can I check my Salary slip / Payslip?
The employer shares the Salary slip / Payslip with each employee through a hard copy or soft copy through the mail. You can also check the salary slip on your employee’s internal portal.
How do I get a Salary slip / Payslip?
After every month, the employer provides the Salary slip / Payslip to employees.
Can I download my Salary slip / Payslip online?
Yes, you can download your Salary slip / Payslip online. Check your company’s employee internal portal for that.
