Why Salary Slips are important: All you need to know!

Salaried individuals receive salaries periodically from their employer and mostly on a particular date. The salary contains a number of things such as the key components of the salary, inclusions, allowances, deductions, taxes, employer details, employee details, etc. All these things need to be sent to the employee along with the salary. The document which includes all such details is called Salary Slip or Pay Slip. As small as it may sound, a salary slip is one of the most important documents for an employee. We will understand what a salary slip is and why it is so important.

What is a Salary Slip?

Salary slip is the proof of salary that an employee receives every month from his/her employer. The salary slip contains all the necessary information related to the salary of the employee. It shows the gross salary of the employee that contains all the allowances and incentives paid by the employer. The salary slip also includes the deductions made by the employer and the taxes paid from the gross salary and shows the net salary of the employee. 

Components of Salary Slip

As said, a salary slip contains a number of details that make it a very comprehensive and useful document. The particulars of a salary slip can be categorized under two heads- Income and Deductions

Income

The income part of the salary slip constitutes all the payments made by the employer to the employee. It includes the following:

• Basic salary: It is the most important component of the salary slip. It shows the basic remuneration that your employer pays to you for your work. The basic salary is usually 30-40% of the entire gross salary. It also serves as the basis for the calculation of other components of your income.
• Dearness Allowance or DA: Dearness Allowance is compensation against the increase in inflation and its impact on employees. 
• House Rent Allowance or HRA: HRA is the allowance that the employer pays for meeting the accommodation expenses of the employee. It constitutes a major part of your salary and it is around 40-50% of the Basic salary.
• Medical Allowance: It is the compensation that an employee receives to meet his medical expenses during his/her period of employment.
• Conveyance Allowance: Conveyance allowance is paid as a fixed remuneration to cover the traveling expenses of the employee from home to workplace and workplace to home.
• Leave Travel Allowance: It is defined as the allowance paid to meet the expenses of the employee and his/her immediate family members while on vacation during leave from work.
• Special Allowance: Some employees are also paid an extra allowance for their hard work or as a token reward by their employers to motivate the employees for work.
• Festive Bonus: Some employers also pay festive bonuses to their employees. For example, the Indian Railways pay a decent Puja bonus to its employees during the festive season.

There are a few other types of allowances as well which the employer may or may not include in the pay slip.

Deductions

Deductions include all such elements of the salary that are subtracted from the gross income.

• Provident Fund  (PF) contribution: The employer deducts and deposits a certain amount of money every month into his/her PF account. A PF account usually serves as a retirement savings plan.
• Professional tax: A few states in India charge professional tax from the employees working in the state. 
• Tax Deductible at Source (TDS): The employer deducts TDS based on the employee’s tax slab and deposits the same into the employee’s PAN. 

There can be other deductions as well such as contributions made to the NPS  account, etc.

Salary Slip Format

The salary slip or pay slip format means the structure or layout of the salary slip in which all the details are arranged. Most salary slips follow a similar format of showing the particulars. 

• An employee salary slip format contains the gross salary which is made up of adding all the payments made by the employer such as basic salary, dearness allowance (DA), house rent allowance (HRA), travel allowance, and more. 
• The gross salary receives several deductions such as PF or/and NPS contribution, applicable TDS, state tax, professional tax, etc. This deduction in salary slip from the gross income gives us the net salary.
• The salary slip also contains the date of the payment of the salary, which is usually at the top corner of the slip.
• Employee’s and employer’s details are also specified clearly.

Here is a basic payslip model:

How to Download Salary Slip?

You can download the salary slip from the confirmation mail received for the payment of your salary or can log in to the employee’s portal on your employer’s payroll platform and download it from there.

Advantages of Salary Slip

There are numerous advantages of salary slip India:

• Proof of salary: The first and foremost benefit of the salary slip is that it serves as your income proof. You can use your salary slip document as your salary proof and enjoy a number of financial offers.
• Enables you to avail different types of benefits: By showing salary slip as the income proof, you can avail benefits of several subsidy schemes offered by the government.
• Helps you to get credit cards: Banks readily provide credit cards to salaried employees. However, they might ask for your last few salary slips in order to process the credit card application.
• Enables you to borrow loans: Salaried individuals can easily get a personal loan, home loan, etc. However, you might have to furnish the salary slip of the last 3 months in order to show your income proof by which the lender can assess your repayment.
• Higher salary in case of a new job: The employee can show the salary slip to the new company he is applying for and negotiate for a better salary above the exit one. 
• Claim Income Tax deduction: You can use the HRA shown in your salary slip and claim deduction on rent paid to reduce your tax liability.