All About Salary Slip Format

Every employer is legally required to send employees a salary slip that offers details of their salary breakdown and deductions.

Most employers adhere to this legal necessity and in all likelihood, you receive a salary slip – either on email, on the company’s ERP or as a hard copy – along with your salary every month. 

Let’s have a look at some of the most common terms that appear on a salary slip format, along with what they denote.

We will also delve into what some of these titles imply for you, like a salaried individual and taxpayer, and what their implications are when you are applying for a loan or a credit card.

Inclusions in a Salary Slip Format in India

CTC

Cost to Company, abbreviated as CTC, is the total amount that your employer spends on an employee individually. However, this is not what you will receive in your bank account. Some of this amount is lost to taxation; some of it goes into ensuring long-term savings, and so on. This amount is more relevant to your employer than to you.

Your CTC is often used as a bargaining chip during negotiations with prospective employers, and in some cases, people might use their CTC to claim bragging rights. 

Basic Salary

This is far more relevant to you and is the taxable component of your salary. This amount is taken into consideration by the income tax department in deciding whether you fall into the tax bracket, and which tax slab you fall under. 

However, you should know this is not all you stand to receive in your bank account on a monthly basis. In fact most companies try to reduce their employees’ tax liability by keeping the basic salary low and including non-taxable allowances or other components that can enable a lighter tax burden. 

House Rent Allowance

Typically abbreviated as HRA, this component of your salary is non-taxable up to a certain amount, but only if you are actually paying rent.

If you live in any of India’s metros, you will receive 50% of your salary as HRA and if you live in a non-metro, you receive 40% of your salary as HRA. Only Mumbai, Delhi, Kolkata and Chennai are recognised as metros by the income tax department – do keep this in mind when making estimates of the amount that you will receive. 

Let’s have a look at how much of your HRA is taxable. Tax will be calculated on whichever is the lowest of the following amounts: 

• Actual HRA amount received from your employer 
• Annual rent paid, minus 10% of your salary (more specifically, your basic salary, and dearness allowance, if the latter is paid by your employer)
• 50% of salary (more specifically, your basic salary, and dearness allowance, if the latter is paid by your employer) for metros and 40% for non-metros.

Conveyance Allowance

This amount is non-taxable (up to a certain limit) and is given to you for your travel to and from work. Depending on how you commute, you might spend much less or much more than the tax-exempt amount, which is Rs 1600, but the amount is fixed by the government. 

You do not need to provide any proof to claim conveyance allowance and to avoid tax on the amount. 

Medical Allowance

Especially if you have high medical expenses (and this includes your dependents like aged parents and children), claiming your medical allowance against actual medical bills is a great way to save tax. The ceiling for this is Rs 15,000 per year. Don’t have medical expenses or medical bills? You will still receive this component of your salary, but you pay tax according to your tax slab. 

Until now, we were looking at inclusions – all the above amounts are in addition to your basic salary and the sum of these amounts is known as your gross salary. Your gross salary is what is observed by lenders when deciding whether to extend credit to you, and the volume of credit to be extended. In some companies, you might also get a dearness allowance (that helps you cope with inflation) or other special allowances that might be performance linked, as part of your gross salary.