There’s a lot of importance that a salary slip holds. It is much more than a document you would require while applying for a loan or getting a new credit card. And to most of us, the salary slip format is confusing and alien-like.
But you must 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 of 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 Payslip format:
The basic salary is 30%-50% of an employee’s total salary. The other components of a Payslip usually depend on the basic salary. The amount under the basic salary is fully taxable.
House Rent Allowance (HRA):
An employee is entitled to a certain amount to pay the house rent. It is generally 40%-50% of the basic salary. The factor that decides the 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; if the employee resides 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 travel cost when they are on leave. The cost of travel is covered by the employee and his/her immediate family members. The conditions are that there should be valid proof of the journey.
The allowance is given to employees to cover their medical expenses while in the employment period. It is a reimbursed expense. Therefore, 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 about working. 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 Payslip format:
The amount contributed by both the employee and the employer. It constitutes 12% of the total salary. The amount is 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 percentage of tax differs from state to state.
Tax Deductible At Source:
The amount deducted by the employer from an employee’s salary is based on the tax slab. The deduction made by the employer is on behalf of the income tax department.