It is important for an employee to know and understand what a salary slip is. If an employee does not understand what a salary slip is, they would have a lot of difficulties filling out paperwork when applying for work and for other needs.
What Is A Salary Slip?
- A Salary Slip is a properly stamped paper issued by an employer. The salary slip informs the employee details about their salary. Various parts, like HRA, TA, some bonuses, etc., are listed in detail. This slip also contains information about deductions.
- Salary slips are required by law to be issued by an employer on a regular basis as proof of salary paid to an employee. Only salaried workers have access to a salary slip, and your employer is responsible for providing you with a copy of your salary slip each month.
- Some smaller businesses do not issue a salary slip on a regular basis, in which case you may request a Salary Certificate from your employer. Although most employers offer digital payslips, some may also provide paper copies.
Now let’s get to know more in-depth facts about the topic in upcoming sub-sections.
Salary Slip Format
- Here we go with the salary slip format – A salary slip format is a standardised structure for recording financial details about an employee’s monthly salary. If you want to know how to make a salary slip, we have shared the format with you below.
- The format may differ slightly from one company to the next. Basic pay, LTA, HRA, PF deduction, Medical Allowance, and Professional Tax must all be included in any salary slip format. Both the income and deduction sections of a salary slip are made up of different components. These parts, along with their definitions, are listed below.
|Company Name (Address)
|BASIC AND D.A
|Name of the bank
|Signature of the employee
Why We A Need Salary Slip?
- Generally, financial institutions like banks ask the applicants to provide their payslip. They regard the payment slip as proof of the financial health of the borrower. The customer’s credit limit depends on the salary slip. A salary slip or a payslip is also a very valuable legal document. One must maintain his salary slip/record for any future requirement.
- The employee’s salary slip is a crucial legal document that serves as evidence of his earnings. As a result, if the employer does not provide you with a Pay Slip, you have the legal right to request one. Although all employers are required to provide you with Pay Slips, a few businesses provide a print of the payslip or email the salary slip in PDF format to their workers so that they can access it at any time.
Importance Of Employee Salary Slips
- The payslip is the legal evidence associated with the organization. People may face financial difficulties at times, or they may need additional funds to purchase a home or car. In that case, an individual may apply for a loan at any bank or financial institution. When applying for a loan, the salary slip proves proof of work and source of income.
- In salary slips, both the employee’s and the employer’s names are listed. The employee’s permanent address is also mentioned on the payslip. On the salary slips, the due date for the salary is also mentioned. Other details, such as deductions, net salary, and gross salary, available on the salary slip.
- Payslip contains deductions. Now, they not only help estimate the amount of taxes to be paid but also help calculate tax refunds.
- Credit cards and loans depend on the individual’s financial situation, and the salary is an indication.
- Also, your previous organization’s salary slips can be used to negotiate better salaries and benefits with future employers.
Components Of Salary Slip
BASIC SALARY- Basic salary, also called base salary, is the regular income of employees before or after any addition or deduction from their income. The basic salary is the amount paid to an employee before any extras are added or subtracted. Allowances will be added to the basic wage, such as the internet allowance for work from home employees or telephone allowance for phone calls.
DEARNESS ALLOWANCE – Dearness allowance is another part of the salary paid to employees. It is paid for reducing the impact of inflation. The laws that control the DA differ depending on where you live. The DA is a completely taxable benefit. There are two types:
1) DA is paid in accordance with the terms of employment.
2) DA not paid in accordance with the terms of employment.
HOUSE RENT ALLOWANCE – A house rent allowance is a portion of an employee’s salary that is paid to cover the cost of renting a home. It helps workers for the amount they pay towards their rents.
This exemption is available to salaried people who live in rented houses and can use it to limit their tax liability. However, this deduction is entirely taxable if you do not live in a rented house.
TRAVEL ALLOWANCE- Conveyance allowance, also known as a transportation allowance, is a form of stipend provided to workers by their employers to cover travel expenses between their home and workplace. Note: In the 2020 Union Budget, a standard deduction of Rs. 50,000 was introduced. Employees are usually granted benefits on top of their basic wages, which may or may not be taxable under the Income Tax Act.
LEAVE TRAVEL CONCESSION ( LTC ) -Tax exemption is available for leave travel allowance. Employers give it to their workers in order to cover their travel costs while they are on vacation. Section 10(5) of the Income Tax Act of 1961 exempts the amount paid as leave travel allowance from taxation. Only domestic travel is protected by the leave travel allowance, and the travel must be by air, rail, or public transportation.
MEDICAL ALLOWANCE – A medical allowance is a set amount paid to employees of a company to cover their medical expenses.
BONUS ALLOWANCE –The employer pays bonus to an employee in recognition of his work. It is important to inspire and motivate employees as much as possible. As a result, some amount is paid as bonus to the workers, which is fully taxable.
OTHER ALLOWANCE- Other allowances may also be available to you, depending on the situation or job. Some have a limit, while others are not fully taxable.
STANDARD DEDUCTION- A standard deduction is a single larger deduction you can claim, instead of multiple smaller deductions. It was first discussed in Budget 2018 as a substitute for the fuel allowance exemption and reimbursement of miscellaneous medical expenses. The standard deduction is Rs 50,000 for the financial years 2019-20 and 2020-21.
Deductions Under Salary Slip
Under the deductions section of the payslip, you’ll notice the following main items:
EMPLOYMENT PROVIDENT FUND – Aside from allowances, there are several elements that are included in your salary slip. They include amounts that are deducted from your pay, such as contribution to provident funds. It is an amount of money deducted from your salary , usually 12 per cent of your basic salary, which you receive after retirement. The Employees Provident Funds and Miscellaneous Act, 1952, governs the scheme. Both the employee and the employer contribute 12% of the employee’s base wage and dearness payment to the EPF. The current interest rate on EPF deposits is 8.50 per cent per annum.
PROFESSIONAL TAXES – Professional tax is a nominal deduction imposed by state governments on all workers who earn more than a certain amount of money. It refers to anyone who makes a living through any medium, not just salaried professionals. Although the standard sum is Rs 250, this is not always the case. The amount of professional tax deducted from you is determined by the state governments and thus varies by state.
TDS – TDS is deducted for those employees whose salary is more than the taxable limit. The employer deducts the TDS from the salary of the employee and deposits it with the government.
Who Should You Ask For A Salary Slip
- Your company’s Human Resources, Finance, or Administration departments.
- Your service provider that handles the employer’s payroll and wages on an outsourced basis.
- If your salaries are paid directly into your bank account, your bank will also be able to provide you with a payslip. However, it will only state that a salary transfer has occurred without providing any additional details.
In simple terms, a payslip or salary slip to an employee is the amount of money paid by the employer to you for the month.It contains all of the details mentioning how the salary was calculated and sent to you. We hope you’ve understood everything about salary slips.