A salary slip is a document that specifies the details of a person’s salary, his employment status and his company. It is provided by the employer usually on a monthly basis. A salaried individual can use this slip for availing a credit card, a personal loan and many types of government subsidies as well. It is also a very important document for filing income tax returns. A person’s monthly income includes his basic salary, dearness allowance, HRA (House Rent Allowance), TA (Travelling Allowance), bonus, etc. A detailed breakdown of these components is mentioned clearly in the salary slip. Almost every employee of a big company receives a salary slip but not all of them know its importance. Most of the individuals do not even bother to give a look at their salary slips until they need it as a valid proof for availing some facility. Therefore, if you are a salaried individual, it is important for you to know the details of your salary slip and understand its importance.
A salary slip is not just a mere document but there is much more to it which must be known and understood by every person who receives it or provides it.
7 Essential Insights Into Salary Slips
If you have always wondered why your salary slip looks so complicated with all the details and what is the implication of those details, you should thoroughly read the details that are given below. The 7 most essential insights on salary slips are:
It States Your Basic Salary
This is the most important information given on your salary slip as all the other parts of your salary depend upon it. You might be amazed to know that your basic salary comprises only 35-50% of your total monthly income. That is if you earn INR 50,000 a month then your basic salary maybe around INR 17,500 only (assuming 35% of total income).
It Specifies All The Allowances
Apart from the basic salary, your monthly income includes all the allowances that are provided by your company. It includes – Travelling Allowance(TA) which is given as compensation for your travelling expenses, House Rent Allowance(HRS) which is given for your house rent and it depends on your location, Medical Allowance which is subject to proofs like medical bills that you need to provide the company and Leave Travel Allowance(LTA) which is also provided by the company depending on its predefined terms and conditions. All these allowances are clearly defined and mentioned on your salary slip and are thoroughly reviewed at the time of filing income tax returns.
It Reflects Your Performance
Your company may also provide you with a performance incentive and special allowance which is given to appreciate you for your hard work. It is also a very important detail in the salary slip as specific mention of this amount not only reflects your performance as an employee but also encourages you to work harder.
Tells Your Bonus Payment
In case you receive any bonus for a successful project that you have delivered, you will get to know the exact amount of it from the salary slip. Usually, such bonus amounts are added in the monthly income directly and therefore you need to review your salary slip to get the details out of it.
Specifies Provident Fund Details
Provident fund is a deduction from your income, and it is also mentioned in your salary slip. This amounts to 12% of your basic salary and it is exempted from tax at the time of income tax payment. Therefore, it is very important information which is also mandatory to be there on your salary slip as it helps you in saving taxes. Although you can opt-out of the provident fund plan anytime, it should only be done if you invest that amount somewhere else. Otherwise, this amount will be subjected to tax deductions.
It Serves as a Receipt of Professional Tax
This is also a very essential piece of information provided on a salary slip as it serves as proof that you have paid your professional tax. A professional tax has to be paid in a few states of India and if you are a resident of any of those states, you are liable to pay the tax. This is charged as per the tax slab defined by the respective state governments.
Discloses TDS (Tax Deductible at Source) Amount
On behalf of the income tax department, your employer deducts a TDS amount from your income based on the defined tax slab. The TDS is mentioned in your salary slip and the same information can be used to reduce the tax burden by investing in tax saving instruments.
Therefore, a salary slip acts as a legal document that you may need to avail loans, submit as an income proof to a new employer, filing ITR, etc. You must be aware of all the details that are described in your salary slip to make its proper utilization.
