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Salary Slip Format

Team AckoDec 21, 2023

Most salaried people in India get a salary slip. It is a document the employer gives to the employee after their salary is credited every month. While it is certainly a happy moment for employees to receive salaries, the importance of salary slips is often overlooked. Otherwise known as a payslip, a salary slip is an essential document that includes details like basic salary, allowances, deductions, bonuses, and more. This article will discuss the vital components of salary slips, the format, and their significance.

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Contents

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What is a Salary Slip?

A salary slip is a document issued typically every month by employers to employees. The document has a detailed salary breakdown and deductions applicable to the employee's salary. It can be mailed to employees or given as a hard copy. Every company paying salaries is legally bound to issue the salary slip periodically as proof of wages paid to its employees and deductions made. The salary slip format should remain consistent across the organisation. 

Note: Full-time workers are subjected to receive pay slips from the organisation they work for. However, independent freelancers, self-employed and part-time workers may not necessarily get the slips. 

Essential Components of A Salary Slip

A salary slip contains breakups of many components, which are essential to understand. Though the details may vary from one company to another, some basic components include the following.

Income/Earnings

  • Basic Pay: It is the fixed component of the salary. It accounts for 30-40% of the salary, making it the most crucial element. It is a fully taxable income. 

  • Dearness Allowance (DA): DA mainly accounts for 30-45% of the basic pay to offset inflation’s impact. It is based on the cost of living and will vary depending on your workplace location. It is a fully taxable income. 

  • Bonus: It is a pay given to the employee on top of their regular earnings. Typically, the bonus is calculated at 2.5-15% on the Basic and DA. It can be paid one-time, monthly, quarterly, or yearly based on the company's policy. It is a fully taxable income. 

  • HRA: House Rent Allowance allows employees to pay for their house rent. Again, the amount will vary based on the location. It typically ranges between 35-50% of your basic pay. Employees are allowed to claim a part of the house rent allowance as a tax deduction per Section 10 of the Income Tax Act, 1961, provided they live in a rented house. 

  • Conveyance: As the name suggests, Conveyance is the allowance paid to employees for their travel to and from work. Under Section 10(14(ii)) of Income Tax 1961, employees can claim tax exemption on conveyance allowance of up to Rs 1600 per month. 

  • Special Allowance: These are performance-based allowances usually given to keep employees motivated. The percentage of special allowance will vary from company to company. It is a fully taxable income. 

  • Medical Allowance: The company offers this allowance to cover medical employee's medical expenses. Employees can save income tax on medical allowances upon submitting the medical bills. Under Section 10 of Income Tax 1961, employees can claim tax exemption of up to 15,000 per annum.  

Deductions

  1. Employee Provident Fund: EPF is a mandatory deduction that an employer makes from an employee's salary and deposits the same in the EPF account along with the employer's contribution. Typically, it is 12% of the basic salary and is exempted from income tax. 

  2. Professional Tax: Many states in India levy professional tax on salary. This tax deducted from salary is deposited with the government. The employee can claim the deduction while filing income returns. 

  3. Tax Deducted at Source: The company deducts TDS from employee salary on behalf of the income tax department. It varies based on the gross tax slab of the employee. Investing in tax-saving schemes like ELSS, PPF, NPS, etc., can reduce the TDS amount. If the TDS is over the tax liability, employees can claim it during ITR filings. 

Other Components

  • Important Details: A salary slip includes other essential details such as company name and employee details (ID, designation, Department, PF No, Bank Details, UAN, DOJ and more). If the company offers employee insurance benefits, the salary slip can also be mentioned. The intervals on which the variables are paid can be discussed here. 

Salary Slip Format 

While there is no universally accepted format for salary slips, many nations might have regulatory guidelines detailing what components should be covered. One standard salary slip format is as follows:

Sample Salary Slip FormatSignificance of the Salary Slip

Company Name <Company Name>
Employee Name <Employee Name>
Pay Period30 days
Employee IDEfF658UANUAN Details
DesignationSenior ManagerPF NoPF Details
DepartmentMarketingBank Details Bank Details 
DOJ01.01.2023
Example of Compensation & Benefits Structure 
 MonthlyAnnually 
EARNINGS1,26,893 15,22,720
Basic 63,080 7,56,960
DA1,00012,000
Bonus 12,816 1,53,792
HRA 25,632 3,07,584
Conveyance 1,60019,200
Special Allowance 20,682 2,48,184
Medical Allowance 2,08325,000
VARIABLE EARNINGS23,750 2,85,000
Variable Pay 23,750 2,85,000
GROSS SALARY 1,50,643 18,07,720
DEDUCTIONS  
Employer Share of PF 7,690 92,280
TDS10,000120000
NET SALARY1,32,95315,95,440
Medical Insurance for self and dependents for Rs. 2,00,000/- per year.
Salary is subject to taxes, including the Income Tax Act of 1961
Note: Variable Pay is payable quarterly, as per review parameters to be shared separately

All employees receiving payslips must be kept safe as it is an important document that can help with various things. Here are some:

  • It is proof of employment needed when applying for visas, higher studies, and more.

  • It is the most crucial document for background checks and verifications. 

  • It includes critical components that help with tax planning and savings.

  • It helps get competing offers when switching jobs.

  • It is necessary when borrowing personal, auto, home, etc.

  • It is required to claim HRA and reduce tax liability.  

  • It acts as income proof when availing of insurance and credit cards.

  • It is a feel-good factor for employees receiving a monthly salary. 

Wrapping up!

Organisations' standard salary slip format can be critical for various reasons. It helps with legal and regulatory requirements, gives clarity to employees, ensures seamless audits and compliances, simplifies digital processing, and more. However, apart from the payslip format, the organisations should provide all the essential components covered in the payslip and be consistent across the company.

Frequently Asked Questions

Here are some common questions about salary slip format.

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Is salary slip important?

Yes, the salary slip is your proof of employment and income. It carries essential components segregated into earnings and deductions. You will need salary slips to file taxes, apply for loans, shift jobs, and more. 

Does the format of a salary slip matter?

Yes, while the companies can have different layouts, the format should be clear, adhere to legal requirements and consistently have all required information. 

Are digital formats of salary slips valid?

The digital version of payslips is typically valid and accepted everywhere. However, you need to ensure the slips carry all the required information. 

Can I change the format of my salary slip?

No, the format of your salary slip will be designed by your organisation and must be presented as it is when required.

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