All You Need to Know About Salary Slips/Payslips

In the professional sphere, each and everything needs to be mandatorily represented in a documented format. This applies to salary slips too. It is proof of the salary figure that employees get from an employer.

Salary slip bears the exact figure of salary drawn. It is framed in a documented format which is issued by an employer to an employee every month.

They can be issued as soft copies or hard copies and include the complete report of an individual’s salary components like Basic Pay, Allowances and Deductions.

What is a Salary Pay Slip?

A salary slip or payslip is a record or a document issued by the employer to the employees. It comprises the breakdown of salary components, deductions and allowances. The payslip can be either a printed document or a softcopy mailed or delivered electronically to the employees, every month.

Importance of a Salary Slip

A payslip fills in as the confirmation of the salary that an individual draws from the business. Aside from this, a payslip can act as a significant report when an individual applies for a salary hike or loan.

For the most part, the financial institutions request that the candidate show his/her payslips for any procedures. The financial establishments treat the payslip as the confirmation of the candidate’s budgetary solidness. The credit limit of the individuals relies upon the payslip. A wage slip or a payslip is likewise a significant authoritative record. An individual should store it in a legitimate way to avoid other hassles.

Payslips are significant authoritative records. Law of the state endorses a specific configuration of the payslips. A business needs to follow the configuration while giving a payslip to his worker. A worker should always check that the payslip is containing all the significant information. A large portion of the monetary establishments and corporate organizations reject the payslips that don’t have all the requisite data.

An individual can confront numerous difficulties in the event that he loses his payslips. To avoid this hassle most of the organizations now provide online login and download facility for the salary slips.

Salary slips serve other purposes, apart from being a proof of income. Here are some of the other major benefits of having a payslip.

Proof of employment:

Payslips are legal proof of association with an organization. While applying to a university or visa, payslips verify employment and source of income.

Planning of income tax:

Payslips contain components that are tax-deductible. Now only do they help in assessing how much tax is to be paid, but also assist in calculating tax returns and refunds.

Helps in borrowing:

Credit cards and loans hinge on the creditworthiness of an individual. This where salary slips pitch in to establish the credit score. Financial institutions require payslips as they corroborate the credit or loan payment capability.

Salary negotiations:

This is a no-brainer. Salary slips from the previous organization can be leveraged to negotiate better salary packages and allowances with potential employers.

Salary Slip Format

Salary slips can be in various formats depending on the employer. However, the common components are:

• Deduction amounts
• Allowances
• Gross pay
• Net pay
• Total number of working days
• Number of days’ employees attended
• Name of the employee
• Employee ID
• Name of the organization
• Code of the organization
• ESI Number
• PF Number
• Aadhar details of the employee
• Signature and stamp of the employer

Components of Salary Slip

1. Income and allowances

• Basic Salary
  This component is perhaps most-important as it helps determine other components. The basic salary is usually fixed at 30-40% of the take-home salary.

• Allowances

Allowances are the benefits given to an employee over the basic pay. It is an amount of money given for the extra benefits to meet the personal expenses. Types of allowances include:

1. Conveyance Allowance (CA)

• • Also known as travel allowance
  • Offered to an employee in order to compensate for expenses incurred on to and from home to work, work-related travel plans, and field trips. Exempted upto a certain limit under the Income Tax Act.

2. House Rent Allowance(HRA)

• • Part of the monthly salary
  • Usually 40-50% of basic salary, but also depends on the location of the rented property
  • Provided to employees in order to meet rented accommodation expenses
  • This component can be claimed as a tax deduction

3. Dearness Allowance

• • Calculated as a percentage of basic pay
  • This allowance is offered to minimise the impact of inflation
  • Completely taxable and must be declared while filing income tax returns

4. Medical Allowance

• • Paid on a monthly basis on a fixed term to employees for expenses incurred on health
  • Completely taxable and paid irrespective of the medical bills submitted by the employees

5. Performance Allowance

• • Offered in recognition of an employee’s work.
  • This is something which can be considered in the category of bonus, appraisal and incentives

2. Deductions

Found under the deduction section of the monthly payslip, the following components are deducted from monthly take-home salary.

1. Tax Deducted at Source
A certain amount of tax deducted every month from the salary by the employer on behalf of the Income Tax Department of India
Deductions based on the income tax slabs which can be reduced by investing in tax-saving schemes

2. Employee Provident Fund (EPF)
Compulsory contribution deducted from the income every month
The deduction is atleast 12% of the basic salary, wherein an equal contribution is also made by the employer. Employee contribution towards EPF tax exempted under Section 80C of the Income Tax Act

3. Professional Tax
The minimal amount of tax deducted from employee’s salary every month and paid to the government.

4. Tax slab and deduction defined by state governments
A salary slip is an important document which must be provided to employees, no later than payday. Some companies may not provide recurring payslips in which case an employee must ask for a salary certificate.