Every earning and deduction on your Indian payslip explained clearly, with a real example for a 12 LPA CTC.
A salary slip (also called a payslip) is a document issued by your employer every month showing your earnings, deductions, and net take-home pay. It is an official proof of income required for loan applications, visa processes, rental agreements, and IT return filing.
Every Indian salary slip has two main sections: Earnings (what you receive) and Deductions (what is taken away). The difference is your Net Salary or In-Hand Salary.
| EARNINGS | DEDUCTIONS | ||
|---|---|---|---|
| Basic Salary | ₹40,000 | Employee PF (12%) | ₹1,800 |
| House Rent Allowance (HRA) | ₹20,000 | Professional Tax | ₹200 |
| Special Allowance | ₹23,830 | Income Tax (TDS) | ₹3,500 |
| Leave Travel Allowance (LTA) | ₹0* | ||
| Gross Earnings | ₹83,830 | Total Deductions | ₹5,500 |
| Net Salary (In-Hand) | ₹78,330 | ||
*LTA component may be shown separately and is claimed by the employee as exemption.
Basic salary is the fixed, core component of your salary — typically 40–50% of CTC. It is fully taxable. All other components like HRA, PF, and Gratuity are calculated as a percentage of Basic. A higher basic means higher PF contribution but also higher tax.
HRA is paid to help cover housing costs. Under the Old Tax Regime, you can claim partial HRA exemption if you live in a rented house. The exempt amount is the minimum of: (a) Actual HRA received, (b) Rent paid minus 10% of basic, (c) 50% of basic (metro) or 40% (non-metro). Under the New Regime, HRA is fully taxable.
Special Allowance (also called Flexible Allowance or Balancing Amount) is the residual component after all other allowances are calculated. It is fully taxable in both tax regimes. This is often the largest component for employees at higher pay grades.
LTA is provided to cover domestic travel costs during leave. Under the Old Regime, the actual fare for domestic travel is exempt — twice in a block of 4 calendar years. LTA is generally not available under the New Tax Regime.
DA is primarily applicable to government employees and is calculated as a percentage of basic salary to offset inflation. Most private sector employees don't receive DA. It is fully taxable.
Variable pay or annual bonus is shown separately and is included in CTC. It is fully taxable. The actual payout depends on individual and company performance. It may be paid monthly, quarterly, or annually.
12% of your Basic Salary is deducted as Employee PF contribution, capped at ₹1,800/month (12% of ₹15,000 EPF wage ceiling). This money goes into your EPF account and earns tax-free interest (~8.25% p.a.). Your employer also contributes 12% of basic — which is part of your CTC.
A state-level tax deducted by the employer, ranging from ₹150–₹208/month depending on the state. Maharashtra, Karnataka, West Bengal, Tamil Nadu, and Andhra Pradesh levy professional tax. Delhi, Uttar Pradesh, and Rajasthan do not have professional tax.
Your employer deducts Tax Deducted at Source (TDS) on salary under Section 192. The annual tax liability is divided by 12 and deducted monthly. The amount depends on your chosen tax regime, income level, and declared deductions (submitted via Form 12BB).
| Term | Definition | Example (12 LPA) |
|---|---|---|
| CTC | Total cost to company (includes employer PF + gratuity) | ₹12,00,000/year |
| Gross Salary | CTC minus employer PF and gratuity | ₹10,05,960/year |
| Net Salary (In-Hand) | Gross minus employee PF, PT, and TDS | ~₹83,000–₹88,000/month |
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