Salary Slip is the documented proof of employee’s salary and incentives. It includes the breakup of the salary. The payslip is useful in calculating the money earned and how much of tax is to be paid to avoid any penalties.

1. 31/10/2016 #FastCollab Guide: Basics of Salary Slips | FastCollab | Blog
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#FASTCOLLAB GUIDE: BASICS OF SALARY SLIPS
 October 28, 2016 (http://www.fastcollab.com/blog/fastcollab-guide-basics-of-salary-slips/)  Mukul Agarwal
(http://www.fastcollab.com/blog/author/mukul-agarwal/)
Salary Slip is the documented proof of employee’s salary and incentives. It includes the breakup of the salary. The
payslip is useful in calculating the money earned and how much of tax is to be paid to avoid any penalties.

2. 31/10/2016 #FastCollab Guide: Basics of Salary Slips | FastCollab | Blog
http://www.fastcollab.com/blog/fastcollab­guide­basics­of­salary­slips/ 2/11
During our course of setting up Payroll structures for most of our customers, we
have received lots of questions on What a salary slip looks like, what components
it should have and how to give a payslip to the employees. In this blog, we are
going to cover basics of Salary Slips.
Why Employer needs to issue Salary Slip?
For an employer, it is a proof during audits if company is paying right amount of tax or not. For an employee, when
they apply for the new job, it is the proof of how much salary and incentives employee was drawing in the previous
company. Working professionals are always asked to produce Salary Slips when applying for loans in bank.
What information Employer needs to show in Salary Slip?
The following is almost a complete list of components (or fields) which needs to be displayed on payslips before
issuing them to an employee. However, based on the type of business and position of employees, employers may
choose to skip some of the below components.
Name of the employee
Company’s name and logo
Company’s address
Mode of payment
Total payments
Gross payments
Net payments
Incentives and perks
Compliance deductions (PF, PT, ESI and TDS)
National insurance number or pin, if any
PAN details
Bank account details

3. 31/10/2016 #FastCollab Guide: Basics of Salary Slips | FastCollab | Blog
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Pension details, if any
Bonus and overtime payments
Stock purchase, if any
Provident Fund pin and other details, etc
Leave balance details
Name & Signature of the employer
Definitions of some of the Basic Salary Components
Below components are classified in two categories – (i) Earnings (ii) Deductions
(i) EARNINGS
Basic Salary:
It is the most important component of salary and other components are structured around it. Generally basic salary is
35-50% of the total compensation. (or Cost-to-Company – CTC)
House Rent Allowance:
HRA is the allowance paid to pay the house / room rent. It is approximately 40-50% of basic salary. Percentage of HRA
may depend on the location of the stay.
Conveyance Allowance:
Conveyance allowance is paid towards the travel cost from home to office and back. Conveyance Allowance is
exempted from tax. An exemption of upto Rs.19,200 annually or Rs.1600 per month is allowed.
Dearness Allowance:
Dearness Allowance is a cost of living adjustment allowance paid to Government employees, Public sector employees
(PSU)and pensioners.

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Leave Travel Allowance:
It is paid to the employee who is travelling while he or she is on leave. This allowance also includes the expenses of
immediate family members also. An employee can claim LTA once in 2 years.
Medical Allowance:
It is paid to employee to cover the medical expenses which incurred during the employment period. Generally it is
subjected to reimbursement; hence employees are required to produce proofs of expense while claiming the
allowance. Claim amount of upto Rs.15,000 annually is allowed.
Internet and Telephone Allowance:
This component usually comes for Employees working in Service based Industry.
Food Allowance:
Food allowance is generally given in the form of Food Coupons. Organisations have to partner with 3rd party coupon
providers. Most commonly used ones are from Sodexo. Most common amount given is Rs.1100 or Rs.2200. The
amount is exempted from tax.
Performance Bonus and Special Allowance:
It is given as a reward to the employee for his performance which could be in terms of achieving goals, following the
company guidelines and behaviour on the floor. Based on company to company performance bonuses can be given
monthly, quarterly, half yearly or annually.
Miscellaneous Allowance or Reimbursement:
This salary component comes based on the type of role an employee is into; and if company allows reimbursement of
expenses done by employees while on some business task. Business Travel Allowance includes reimbursement for
travel, food, hotel, fuel and other such expenses. Shift Allowance is to pay the amount for employees working at night
shift.

5. 31/10/2016 #FastCollab Guide: Basics of Salary Slips | FastCollab | Blog
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(ii) DEDUCTIONS:
Provident Fund:
Provident Fund is deposited in government controlled body or employees’ provident fund organization. If employee’s
monthly salary is 20. However, there is an option to opt out of this scheme.
Professional Tax:
This tax is calculated based on the Professional Tax slabs for various Indian States
(http://www.fastcollab.com/blog/fastcollabguide-professional-tax-slabs-in-various-indian-states/), as defined by
Government of India. It is generally a few hundred rupees and is applicable only in some states of the country.
Tax Deducted at Source:
TDS or Income Tax is a direct form of tax which is applied based on the Salary slabs as defined by Government of
India. Currently, Govt employees with salary < Rs 3 lakh annually and Private employees with salary < Rs.2.5 lakh are
exempted from any tax deductions. Employer has to submit these taxes to the income tax department.
Voluntary Provident Fund:
VPF is an investment option where a salaried employee can set aside more than the normal compulsory deduction of
12% of basic salary as savings fund. An amount of upto Rs.1 lakh annually comes under tax benefits.
Annual Insurance
This is basically Group Health Insurance, which a company pays on behalf of the employees. Usually it is shown as
annual deduction from gross salary of the employee.
We always advice our customers not to indulge in running payroll on excel sheets, as it is most tedious process and
takes longer time. Excel based payrolls are prone to errors as well.

6. 31/10/2016 #FastCollab Guide: Basics of Salary Slips | FastCollab | Blog
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FastCollab (http://www.fastcollab.com/) provides a robust end-to-end Payroll Management System where employers
can create salary structures, collect IT declaration of employees, run payroll and issue payslips to each employee
online.
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 5 Crucial Services Small and Medium businesses are outsourcing to FastCollab
(http://www.fastcollab.com/blog/5-crucial-services-small-and-medium-businesses-are-outsourcing-to-fastcollab/)
 Payroll (http://www.fastcollab.com/blog/category/payroll/)  compliance
(http://www.fastcollab.com/blog/tag/compliance/), deductions (http://www.fastcollab.com/blog/tag/deductions/),
earnings (http://www.fastcollab.com/blog/tag/earnings/), Income Tax (http://www.fastcollab.com/blog/tag/income-
tax/), payroll (http://www.fastcollab.com/blog/tag/payroll-2/), payslip (http://www.fastcollab.com/blog/tag/payslip/),
salary slip (http://www.fastcollab.com/blog/tag/salary-slip/).  permalink (http://www.fastcollab.com/blog/fastcollab-
guide-basics-of-salary-slips/).
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