How to Read Your Salary Slip in India: Every Line Explained Simply

Your offer letter said one number. Your bank account shows a smaller one. The gap is not a mistake — it is your salary slip, doing its job. A salary slip is simply a monthly statement of what you earned, what was deducted, and what you received.

Your salary slip has three layers: gross pay (everything you earn before deductions), total deductions (EPF, tax, insurance and state levies), and net or in-hand pay (what reaches your bank account). Your CTC is usually higher than all three, because it also includes employer contributions you never receive as cash.

CTC (Cost to Company) is what employing you costs your company in a year: your gross salary plus things it pays on your behalf, such as the employer's EPF contribution, gratuity accrual and sometimes insurance premiums. You never receive the full CTC as cash. Gross pay is your total earnings for the month, before deductions: basic, HRA, special allowance and any other earnings. Net pay, or in-hand salary, is what remains after deductions: gross pay minus total deductions. An illustrative example: basic ₹30,000, HRA ₹12,000 and special allowance ₹8,000 give gross pay of ₹50,000. Deduct EPF ₹3,600, professional tax ₹200 and TDS ₹2,500, and net pay is ₹43,700. CTC would be higher still, since it also includes the employer's EPF contribution and gratuity accrual.

Basic salary is the foundation of your pay structure, usually 40–50% of CTC. EPF contributions and gratuity are calculated on it, so a higher basic generally means higher retirement savings but also higher EPF deductions today. House Rent Allowance (HRA) is paid to employees in rented accommodation. Under the old tax regime, the exempt portion is the lowest of three figures: HRA actually received, rent paid minus 10% of basic plus dearness allowance, and 50% of basic plus dearness allowance in a metro city or 40% elsewhere. From FY 2026-27, the metro list covers eight cities — Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. Under the new tax regime, HRA exemption is generally not available. Special allowance is the flexible balancing figure in most pay structures. It is fully taxable; employers use it to make up the remainder of salary after basic, HRA and other defined components. Bonuses, incentives and arrears appear only in the months they are paid. A bonus or arrears from a revision will inflate gross pay — and TDS — for that month, so do not compare a bonus month's slip with an ordinary month's. Other allowances, such as leave travel allowance, depend on company policy and sometimes on bills or declarations.

EPF (Employees' Provident Fund) is retirement savings. You and your employer each contribute 12% of basic salary plus dearness allowance. Your entire 12% goes into your EPF account; the employer's 12% is split, with 8.33% going to the Employees' Pension Scheme (EPS), subject to a wage ceiling, and the rest to your EPF account, plus small amounts for insurance and administration. EPF is mandatory for employees in covered establishments earning basic plus dearness allowance up to ₹15,000 a month, and many employers extend it to higher salaries. If your basic exceeds the ceiling, your employer may calculate contributions on your full basic or on the ceiling amount, depending on policy. The EPF interest rate is notified each year; for FY 2025-26 it was 8.25% per annum. ESI (Employees' State Insurance) applies only to some employees: those earning gross wages of ₹21,000 a month or less (₹25,000 for persons with disability) in covered establishments, generally those with 10 or more employees. The employee contributes 0.75% of wages and the employer 3.25%. In return, insured employees and their families get medical care through the ESIC network and benefits such as sickness and maternity benefits. If your salary is above the ceiling, you simply will not see an ESI line; if it crosses the ceiling mid-year, coverage generally continues until the end of that six-month contribution period. Professional tax is a state levy, deducted by your employer and paid to your state government. The Constitution caps it at ₹2,500 per person per year, and each state sets its own slabs. In Maharashtra, men earning above ₹10,000 a month pay ₹200 a month (₹300 in February), totalling ₹2,500 a year, while women earning up to ₹25,000 a month are exempt. Some states, such as Delhi, levy none at all. Labour Welfare Fund (LWF) is another small state levy, applicable only in certain states. Amounts are flat and tiny — Maharashtra's employee share is ₹25 per half-year, deducted in June and December. A small deduction appearing only in those months is often LWF. Other deductions, such as advances recovered, should match something you agreed to.

TDS, or tax deducted at source, is your employer deducting income tax from your salary each month and depositing it with the government. It is not an extra charge — it is your income tax, paid in monthly instalments. At year end, your employer issues Form 16, and your final tax is settled when you file your return. Under Section 192 of the Income Tax Act, your employer estimates your annual salary, applies the applicable regime's slabs, and spreads the annual tax across the remaining months. That is why TDS can jump in a bonus month or after a revision, and why it can fall if you submit investment declarations or proofs. The new tax regime is the default for TDS. For FY 2026-27, the slabs are unchanged: nil up to ₹4,00,000 of taxable income, 5% up to ₹8,00,000, 10% up to ₹12,00,000, 15% up to ₹16,00,000, 20% up to ₹20,00,000, 25% up to ₹24,00,000, and 30% above that, plus a 4% health and education cess. Salaried employees get a standard deduction of ₹75,000, and a rebate of up to ₹60,000 means taxable income up to ₹12,00,000 can result in no tax — effectively, a gross salary up to about ₹12,75,000 can attract no TDS. If you prefer the old regime, you must tell your employer during the year; otherwise TDS will be computed under the new regime by default.

TDS is an estimate. Excess deducted comes back as a refund after you file; too little deducted may mean tax owed at filing. Compare the slip's TDS line with Form 16 once a year.

Some CTC break-ups show a gratuity line, and readers wonder whether money is being taken from them. It is not: gratuity accrual is an amount your employer sets aside as a future liability, not a deduction from monthly pay. Gratuity is a statutory lump sum paid on exit after long service, governed by the Payment of Gratuity Act, 1972, which applies to establishments with 10 or more employees. Employees generally become eligible after five years of continuous service with the same employer, except in cases of death or disablement. The formula is: (last drawn basic plus dearness allowance × 15 × completed years) ÷ 26. The tax-free limit is ₹20 lakh. A gratuity figure inside your CTC is a promise about a future payment, not a current deduction.

Earnings: basic, HRA, special allowance, plus any bonus or arrears that month — these add up to gross pay. Deductions: EPF, ESI, professional tax and LWF (each where applicable), TDS, plus any recoveries — these add up to total deductions. Result: gross pay minus total deductions equals net pay, credited to your bank account. CTC: gross pay plus employer EPF contribution, gratuity accrual and employer-paid insurance — hence CTC is always higher than in-hand pay.

1. Name, PAN, bank account and UAN. A wrong PAN means TDS may not be credited correctly against your name. 2. Basic salary and pay days. Confirm your basic matches your appointment letter or latest revision, and that the slip covers a full month unless you joined mid-month or took unpaid leave. 3. EPF contribution and credit. Your EPF deduction should be 12% of basic plus dearness allowance, or match your employer's stated policy. Confirm on the EPFO portal that it reached your account. 4. TDS against your regime choice. A sudden jump often traces to a bonus, a revision, or missing investment proofs. 5. Arrears, recoveries and one-off lines. Any unfamiliar line deserves one question to payroll; corrections are easiest in the same financial year.

Assuming CTC equals salary. CTC includes employer contributions and future benefits; judge an offer by its gross and net structure, not the CTC headline. Ignoring the slip for months. Most slip errors — a missing EPF credit, a wrong PAN, an unapplied HRA declaration — are easy to fix early and painful to fix after Form 16 is issued. Submitting HRA proofs late. Under the old regime, exemption depends on rent actually paid and supporting documents; missing proofs can mean higher TDS. Forgetting to update declarations. A revision, a second job or a rent change all affect TDS and HRA, so update payroll promptly. Confusing gratuity accrual with a deduction. Gratuity in your CTC is not taken from your pay; if a similar amount appears under deductions, query it.

This article is for educational purposes only and is not financial advice. Please consult a SEBI-registered investment adviser for personalized guidance. Investments are subject to market risk.

EPFO / ClearTax — EPF Scheme: employee contribution 12% of basic plus dearness allowance; employer 12% split with 8.33% to EPS up to ₹1,250 a month; FY 2025-26 interest rate 8.25%. ESIC-related guides — ESI wage ceiling ₹21,000 a month (₹25,000 for persons with disability); employee 0.75%, employer 3.25%; six-month contribution periods April–September and October–March. Maharashtra professional tax slabs (MahaGST / ClearTax summaries) — annual cap ₹2,500; ₹200 a month (₹300 in February) above ₹10,000; women exempt up to ₹25,000 a month. ClearTax — HRA exemption: lowest of HRA received, rent minus 10% of basic plus dearness allowance, and 50% (metro) or 40% (non-metro); eight-city metro list from FY 2026-27. Budget 2026 / Economic Times / Tata Capital — FY 2026-27 new-regime slabs unchanged; standard deduction ₹75,000; rebate up to ₹60,000; nil tax up to ₹12,00,000 taxable income (about ₹12,75,000 gross salary). ClearTax — Payment of Gratuity Act: five years' continuous service; formula (last drawn basic plus DA × 15 × years) ÷ 26; tax-free limit ₹20 lakh. Frappe HR / Keka — Labour Welfare Fund: flat state amounts, small employee shares, varying frequency by state (e.g. Maharashtra ₹25 per half-year).