The document outlines key components of salary slips, including basic salary, allowances (such as dearness allowance, house rent allowance, conveyance allowance), and their tax implications. It emphasizes understanding the taxability and impact of each component on in-hand salary and provides details on income tax slabs and deductions for various categories of taxpayers. Additionally, it advises comparing salary offers based on overall benefits rather than just in-hand salary.

1. CRACK YOUR
SALARY SLIP
AND SAVE
TAXES

3. BASIC SALARY
It’s the most important component of your salary and
generally comprises 35-50 % of your total salary. Most
of the other components are structured around it
.
Tax Implications: 100% taxable
Adds to in-hand? Yes

4. DEARNESS ALLOWANCE
Dearness allowance (D.A.) is part of a person's salary. D.A. is calculated as a percent of the basic
salary. This amount is then added to the basic salary along with house rent allowance to get the
total salary. Rates vary as per rural/urban areas etc.
Pensioners and the family pensioners are granted D.A. against the price rise. During the
reemployment under Central or State Government, Government undertaking, Autonomous body
or Local Body, they are not eligible to draw D.A., in which case D.A. is allowed in addition to fixed
pay or time scale
D.A. is not allowed while the pensioner stays abroad and also in case of employees absorbed in
public undertaking or bodies
If the pensioner stayed abroad without reemployment, he shall be eligible to draw D.A. on
pension
DA is fully taxable under salary head of income tax act

5. HOUSE RENT ALLOWANCE
It’s an allowance to pay your house rent. Normally, HRA is 40-50
% of the basic, based on your location (metro or non-metro).
Tax Implications: You get tax exemption based on whichever of
the following is lower
•40% of your basic pay
•Actual rent minus 10 % of basic
•HRA component specified on your salary slip
Adds to in-hand? Generally Yes

6. CONVEYANCE ALLOWANCE
It’s paid by the company towards cost of travel from home to work
and back and is exempt from Income tax.
Tax Implications: Rs 1600 per month or the conveyance allowance
component in your salary slip, whichever is lower, is exempted from
tax.
Adds to in-hand? Yes, depending on how much you actually
spend.

7. Leave Travel Allowance
It’s given by employers to cover the cost of employee
travel while on leave. It includes travel expenses of
your immediate family members as well.
Tax Implications: Proof of journey required to avail
deduction subject to certain limits. Any expenses
incurred during the trip apart from travel does not count
towards your LTA tax exemption. The exemption is also
applicable only for 2 journeys undertaken in a block of
4 calendar years.
Adds to in-hand? No.

8. MEDICAL ALLOWANCE
It is given by employers to cover any medical expenses incurred during the period
of employment. It is also generally a reimbursed expense and thus subject to
providing proof of expense.
Tax Implications: The allowance is exempt up to 15,000 per annum subject to
proof of expenses such as medical bills.
Adds to in-hand? Yes. If you fail to provide the proof, you still receive the amount,
but will be fully taxed.

9. Performance Bonus Or Special
Allowance
It is given to reward or encourage employee performance and varies with performance or company guidelines.
Tax Implication: 100% Taxable
Adds to in-hand? Yes. It can be variable and therefore, difficult to assess as part of your in-hand.
Other Allowances: There are quite a few other kinds of allowances based on the industry or the company. Most such
allowances are fully taxable. They might or might not add to your in-hand salary based on the conditions they are
subject to.
Make sure you talk to the HR and get a clear understanding of the in-hand and tax implications of your salary
components.

10. Entertainment Allowance
Tax Implication: 100% Taxable
Employees are allowed the lowest
of the declared amount –
one-fifth of basic salary
actual amount received as allowance
or
Rs. 5,000.
of customers.
However, Government employees can claim exemption in the manner provided in section 16 (ii)
This is an allowance provided to employees to reimburse the expenses incurred on the hospitality

11. THE DEDUCTION
PART
OF YOUR
SALARY
SLIP

12. PF is typically 12% of your basic salary which is put into a government controlled body, Employees'
Provident Fund Organisation. Your contribution is typically matched by the company subject to certain
maximum amount, defined as per the company policy. You can also choose to opt out from the PF
scheme.
How to lower this deduction? You can choose to opt out of the PF scheme. In case you opt out,
make sure you invest it regularly in better investment options like equity, mutual funds that
gives you a higher return. If you are unsure of investing the money, it’s best to stay invested in PF.
Provident Fund:

13. This is payable only in the following states-Karnataka, West Bengal, Andhra Pradesh, Telangana,
Maharashtra, Tamilnadu, Gujarat, Assam, Chhattisgarh, Kerala, Meghalaya, Orissa, Tripura, Jharkhand,
Bihar, and Madhya Pradesh. It normally amounts to just a few hundred rupees each month and is subject to
your gross tax slab.
This amount is deducted from your taxable income.
How to lower this deduction? This deduction cannot be lowered.
Professional Tax:

14. This amount, which is decided based on your overall tax slab,
is deducted on behalf of the income-tax department by your
employer.
How to lower this deduction? You can reduce this burden by
investing in tax savings instruments under
Section 80 C or other sections under the IT act.
Tax deductible at source:

15. PF / ESIC rate of deduction for both Employee & Employer
contribution
The Provident Fund (PF) contribution is 12% of PF Wages from both employee and employer. For the
calculation, the maximum limit of Basic is Rs 6500/-. It means even if the employee’s PF Wages is above Rs
6500/-, the employer is liable to contribute only on Rs 6500/-, that is Rs 780/-
However if an employee so desires he may voluntarily contribute more than 12%. Apart from it an employer
also has to pay some administration charges. The various accounts of PF Challan are as mentioned below.
Employees complete 12% goes to PF account
while employer contributions’ 8.33% goes to
Pension Fund and 3.67% goes to PF Fund.
Employee State Insurance
Corporation(ESIC) is deducted on gross
salary which is 1.75% from the employee
contribution & 4.75% from the employer
contribution.

16. Things to keep in mind when comparing salary
slips in offers:
1. Your basic salary is critical as most of your allowances will be based on that figure.
2. Look for special allowances and check whether they are performance or event based.
3. Do not focus only on the in-hand salary. Look at the other benefits the company provides
(health insurance, accident insurance, free food, bus transport, better career growth) which might
outmatch a higher in-hand salary offer from some other company

17. INCOME TAX SLABS
For Men
Below 60
Years Of
Age
For Women
Below 60
Years Of
Age
For Senior
Citizens
For Super
Senior
Citizens
Income Tax
Deductions
and
Exemptions

18. For Men Below 60 Years Of Age
Income Tax Slab Income Tax Rate
Income upto Rs.
2,50,000
Nil
Income between Rs.
2,50,001 - Rs.
500,000
10% of Income
exceeding Rs.
2,50,000
Income between Rs.
500,001 - Rs.
10,00,000
20% of Income
exceeding Rs.
5,00,000
Income above Rs.
10,00,000
30% of Income
exceeding Rs.

19. Income Tax Slab Income Tax Rate
Income upto Rs.
2,50,000
Nil
Income between Rs.
2,50,001 - Rs.
500,000
10% of Income
exceeding Rs.
2,50,000
Income between Rs.
500,001 - Rs.
10,00,000
20% of Income
exceeding Rs.
5,00,000
Income above Rs.
30% of Income
exceeding Rs.
For Women Below 60 Years Of Age

20. For Senior Citizens (Age 60 years or more but
less than 80 years)
Income Tax Slab Income Tax Rate
Income upto Rs.
3,00,000
Nil
Income between Rs.
3,00,001 - Rs.
500,000
10% of Income
exceeding Rs.
3,00,000
Income between Rs.
500,001 - Rs.
10,00,000
20% of Income
exceeding Rs.
5,00,000
30% of Income

21. For Senior Citizens (Age 80 years or more)
Income Tax Slab Income Tax Rate
Income upto Rs.
5,00,000
Nil
Income between Rs.
500,001 - Rs.
10,00,000
20% of Income
exceeding Rs.
5,00,000
Income above Rs.
10,00,000
30% of Income
exceeding Rs.
10,00,000

22. DEDUCTIONS

23. 8390107415
9782244338
VAIBHAV
GUPTA