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Decoding a Salary Slip
September 12, 2017
Most people aren’t quite interested in learning about the basics of a salary slip. Only when the time comes to change their jobs or apply for a loan, etc. they pick up their latest salary slip only to be confused by the jargon.
The following points cover the elements of a salary slip:
- Basic Salary
This is the most important part of your salary and makes up for 40% to 50% of it depending on the company you are working in. Interestingly, the junior employees often get a larger portion of their salary as the basic salary than the senior employees. However, the basic salary is 100% taxable and comes in the “in-hand” salary. - HRA
House Rent Allowance, which is commonly known as HRA is the amount you receive from your employer for paying the house rent. It is usually about 40% to 50% of the basic salary. However, you can get tax benefit on whichever of the following is lower:- House rent minus 10% of the basic salary
- 40% of your basic salary
- Actual HRA given to you
- Conveyance Allowance
This is the amount given to you for your commuting expenses. Just like HRA you can enjoy tax deduction on whichever of the following is lower:- Actual conveyance allowance amount
- Rs. 1,600 per month
- Medical Allowance
Employers give medical allowance for the payment of the medical expenses that occur during the employment of an individual. In most cases, you are reimbursed on the medical bills that you provide rather than getting the funds disbursing in advance. You can also get tax benefit up to Rs. 15,000 per annum on the medical allowance, granted you furnish the invoices.
Deductions
A salary slip also comprises tax deductions which are:
- Professional Tax: Tax collected by the state government which is usually just a few hundred rupees.
- Provident Fund: 12% of your basic salary put in the government’s PF scheme.
- TDS: Tax Deductible at Source deducted by the employer on the behalf of the government.
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