The salary slip. The payment proof of your hard work. It is a document given by the employer to the employee. It is generally issued monthly after the salary is credited to the employee’s bank account. It can either be provided as a physical piece of paper, or its e-version can be mailed to the employee’s account. The company is under the legal obligation to issue a salary slip to the employee to have a record of the salary payments and deductions.
Components Of Salary Slip
Most of the employees do not pay much attention to this document as many are majorly concerned only with the salary credited into their respective accounts. A salary slip shows the salary of the employee broken down into various components like the basic salary, deductions, allowances and many more. A salary slip can have various formats, but some of the most important headings of a salary slip are:
- Basic salary: The essential component of salary that constitutes the largest part of about 40%-50% of the total salary. It varies according to your position in the company. This forms the basis for all the other components of the salary.
- Dearness Allowance: This is paid on top of the basic salary, and this component varies according to the prevailing inflation rate. It is generally 30%-40% of the basic pay, and for income tax, both the basic and the dearness allowance is taken together.
- House Rent Allowance (HRA): All the companies must pay some amount under this heading which varies between 10%-35% of the basic and depends upon the position of the employee in the company. This is tax-free up to a certain limit provided the house rent proofs are furnished.
- Conveyance Allowance: The amount that the company pays to cover the work-related travel expenses. This is also free of tax up to a certain limit.
- Medical allowance: Many companies also provide a medical allowance which can be availed at the time of an accident or some major mishap. This amount will be disbursed only if a proof is provided and is limited up to the amount of INR 15000.
- Target linked pay: This is a performance-based component, provided as a lump sum amount quarter wise or semi-annually. This component is also tax-deductible.
- Income tax or Tax deducted at source (TDS): This is a deduction that the company does according to the tax slabs as specified by the government of India. This is called tax deducted at source, and the final income that the employee receives is after the tax deduction.
- Professional Tax: Levied by the state government, every working professional must pay this.
- Provident Fund: As mandated by the government, the employer deducts 12% of the basic salary every month and makes a similar contribution to the employee’s provident fund account which is tax-free and is kept as a means for the employee’s retirement, so it is part of the employee’s investment portfolio.
The basic components of a salary slip are described above. There can be some other headings also, which varies from company to company.
Importance Of Salary Slip
A salary slip is not only provided just because it is a legal requirement of the company to do so. But a salary slip has it’s own importance and uses. Some of the importance of a salary sip are:
- Planning of income tax: Different components of the salary has different tax treatments as authorized by the law. So, having a clear idea about different components can help the employee to maximize the tax savings for the given financial year.
- Employment proof: Apart from the offer letter, this salary slip is something that forms the proof of an employee’s employment for a particular company. It can also be submitted as proof of the last salary drawn when applying for a visa to a foreign place or for various programs at various universities.
- Loans/ Credit Cards: This salary slip can also help in availing loans where it can be submitted as proof and can also help the institution to gauge the employee’s ability of debt repayment. It also serves as proof when applying for any borrowings, mortgage or credit cards.
- Retirement Savings: Having an idea about the provident fund, gives a clear indication regarding the retirement savings that the company will provide the employee.
- Helps in further employment: Knowing the various components of the salary slip can help in assessing various job offers and can also help the employee to negotiate salaries while switching jobs.
Sample Format For Salary Slip
Apart from the components of a salary slip, some of the other mandatory things that need to be there in a salary slip are Date, Name of the company, Logo, Address, Month, Year, Employee Code, Employee Name, Designation, Bank account number and many more. Let us look at some of the sample formats of a salary slip.
Here are some samples for a salary slip. The basic details remain the same, only the kind of allowances and the deductions change. Providing the employee with a payment slip is mandatory for every employer. A salary slip, as discussed above, has its importance to play and must be saved carefully. Thus, salary slips are important for any employee to avail of various long-term benefits.