There’s a lot of importance that a salary slip holds. It is much more than a document that you would require while applying for a loan or while getting a new credit card. And to most of us, the salary slip format is confusing and alien-like. But it is important that you understand what all a salary slip holds. For instance, you would know that a salary slip is a document that an employer sends to an employee. And that it contains details about an employee’s salary and is proof for the same. But what about the other components?
Let us have a look at the salary slip format:
Details of the components of Income in the pay in slip format:
Basic salary is 30%-50% of the total salary that an employee receives. The other components of a pay slip usually depend on the basic salary. The amount under the basic salary is fully taxable.
House Rent Allowance (HRA):
In order to pay the house rent, an employee is entitled to a certain amount. It is generally 40%-50% of the basic salary. The factor that decides the actual amount of the HRA is whether you live in a metro city or a non-metro city. If the employee has a rented house in a metro city, the HRA is 50% of the salary and if the employee is residing in a non-metro city, the HRA is 40% of the salary.
The amount paid by the company to cover the traveling expenses of the employee. The cost is only to cover the travel from home to work and work from home.
Leave Travel Allowance:
An allowance is given to employees to cover the cost of travel when the employee is on leave. The cost of travel is covered for the employee as well as for his/her immediate family members. The conditions are that there should be a valid proof of the journey and the journey should be within India.
The allowance is given to employees to cover their medical expenses, while they are in the employment period. It is a reimbursed expense. Therefore, a valid proof is required for the expenses made by the employee.
Performance Bonus and Special Allowance:
An allowance is given to employees so that they stay enthusiastic to work. This bonus amount is completely taxable. A lot of other special allowances are also given to the employees, and collectively come under the head of ‘Other Allowances.’
Details of the components of Deduction in the pay slip format:
The amount contributed by both the employee and the employer. It constitutes 12% of the total salary. The amount is put under a government control body named ‘Employee’s Provident Fund Organization’. The EPF amount is exempted from tax.
There are a few states that levy tax on salaried individuals. The few states of India that levy the tax are the following, Tripura, Odisha, Andhra Pradesh, Madhya Pradesh, Maharashtra, Telangana, Gujarat, Tamil Nadu, West Bengal, Karnataka, Megahlaya, Sikkim, Assam, Chattisgrah and Kerala. The percentage of tax differs from state to state.
Tax Deductible At Source:
The amount deducted by the employer from the salary of an employee on the basis of the tax slab. The deduction made by the employer is on behalf of the Income tax department.