Personal Finance
Your Salary Slip Explained: Every Component Decoded
A complete guide to every line item on an Indian salary slip — basic, HRA, special allowance, EPF, professional tax, TDS — and why your CTC and take-home differ so much.
Read with the publication date in mind. Portal requirements and rates can change. How to report a correction.
Most employees glance at the net pay number on their salary slip and file it away. But understanding every line helps you verify deductions are correct, claim the right tax exemptions, compare job offers accurately, and understand why CTC and take-home diverge so significantly.
Earnings Components
Basic Salary: Foundation of your structure — typically 30–50% of CTC. Determines EPF contributions (12% of basic), gratuity calculation, and HRA eligibility. Higher basic = more PF savings but lower take-home.
HRA: 40–50% of basic (50% for metro cities). Tax-exempt under Section 10(13A) if you pay actual rent — only available under the Old Tax Regime. Claim by submitting rent receipts and landlord's PAN to your employer.
Special Allowance: The residual balancing figure — CTC minus Basic, HRA, employer PF, and fixed allowances. Fully taxable under both regimes.
Other allowances: Transport (₹1,600/month exempt under Old Regime), LTA (exempt for 2 journeys per 4-year block), medical (₹15,000/year exempt under Old Regime).
Deductions Components
Employee EPF: 12% of basic+DA — builds tax-free retirement savings. Employer contributes another 12% (3.67% to EPF, 8.33% to EPS) — this never appears in your take-home.
Professional Tax: State-levied (Karnataka, Maharashtra, Tamil Nadu, WB, Andhra) — ₹150–208/month. Zero in Delhi, UP, Rajasthan, most northern states.
TDS: Income tax spread across 12 months. Your employer calculates this based on your declared deductions and investments (Form 12BB). Verify against the Income Tax Calculator.
CTC vs Gross vs Net
CTC = everything the employer spends: your gross salary + employer PF (12% basic) + group health insurance + gratuity provision. You never receive employer PF directly.
Gross Salary = CTC minus employer-side costs. Net Pay = Gross minus employee PF, professional tax, and TDS.
Example — ₹12L CTC (40% basic): Basic ₹4.8L, HRA ₹2.4L, Special ₹2.88L. Employer PF ₹57,600 (your cost, not received). Gross = ₹11.42L. Deduct employee PF ₹57,600, PT ₹2,400, TDS. Net annual ≈ ₹10.2–10.6L = ₹85,000–88,000/month.
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