How to Read Your Salary Slip in India: Complete Guide (2026)

Understanding Your Indian Salary Slip (Payslip)

Your monthly salary slip is a legal document showing exactly how your gross salary is calculated and what deductions are made. Most employees glance at the "Net Pay" figure and ignore the rest — but understanding every line item helps you verify accuracy, plan taxes, and make informed financial decisions.

Typical Indian Salary Slip Structure

A standard Indian payslip has three sections:

Section 1: Employee & Employer Details

• Employee name, ID, department
• PAN number (critical for tax)
• Bank account number (verify!)
• UAN (Universal Account Number) for PF

Section 2: Earnings (Credit to You)

• Basic Salary
• HRA
• Special Allowance
• LTA (if applicable)
• Medical Allowance
• Variable/Performance Pay
• Overtime (if applicable)

Section 3: Deductions (Taken from Gross)

• Employee PF
• Professional Tax
• TDS (Income Tax)
• ESI (if applicable)
• Loan EMI (if salary loan)

Earnings Components: What Each Means

Basic Salary

The foundation of your compensation. Usually 40–50% of CTC. All other allowances are calculated as a percentage of Basic. Higher basic = more PF deduction but more gratuity accumulation.

HRA (House Rent Allowance)

Typically 40–50% of Basic. If you pay rent and choose the old tax regime, the exempt portion is not taxable. The non-exempt portion (usually labeled "Taxable HRA") forms part of your taxable income. Even if you don't claim HRA exemption, the amount is still paid — it just becomes fully taxable.

Special Allowance

The residual component — whatever's left after Basic, HRA, and other defined allowances are subtracted from your agreed gross salary. Fully taxable. May also be labeled as "Flex Allowance," "Miscellaneous Allowance," or "City Compensatory Allowance."

LTA (Leave Travel Allowance)

Paid 1–2 times a year (sometimes monthly, claimed twice in a 4-year block). Exempt from tax if actually used for travel within India with proper documentation. Without claiming, it's taxable.

Medical Allowance

Up to ₹15,000/year is exempt (old regime only) if actual medical bills are submitted. Under the new regime, this is fully taxable.

Variable Pay / Performance Pay

Paid quarterly or annually. Shows up on your payslip in the quarter it's paid. Watch this — it inflates that month's gross and therefore the TDS for that month.

Deductions: What's Taken From Your Salary

Employee PF (Provident Fund)

12% of Basic Salary (or 12% of ₹15,000 = ₹1,800 if capped). This goes to YOUR EPF account — it's your savings, not a tax. Current EPF interest rate: 8.25% p.a. (FY 2026-27).

Your payslip should show your UAN (Universal Account Number). Always verify your UAN is active and your PF is being credited monthly by checking the EPFO portal.

Professional Tax

Levied by state governments. Deducted monthly:

TDS (Tax Deducted at Source)

Your employer estimates your annual income tax liability at the start of the year and deducts 1/12th each month as TDS. This appears as "Income Tax" or "TDS" on your payslip.

How to verify your TDS: Form 26AS (download from Income Tax portal) shows all TDS deducted against your PAN. Verify this matches your payslip before filing your ITR.

If your TDS is ₹0: Either your income is below ₹12L (zero tax) or you've submitted declarations for HRA/home loan that reduce tax to zero.

ESIC (Employees' State Insurance Corporation)

Applicable if your gross salary ≤ ₹21,000/month. Employee contribution: 0.75% of gross. Employer: 3.25%. Provides government health and disability coverage. If your salary is above ₹21,000, no ESIC deduction.

Red Flags to Watch on Your Salary Slip

1. **PF not deducted despite deduction shown**: Check your EPFO account monthly
2. **TDS amount seems wrong**: Use our [Tax Estimator](/tax-estimator/) to cross-verify
3. **Different bank account number**: Could indicate fraud — contact HR immediately
4. **UAN not shown**: Insist your UAN appears on every payslip
5. **Net Pay doesn't match bank credit**: Check for loan EMI or advance recovery not reflected clearly
6. **LTA paid without your knowledge**: This is taxable if not claimed properly

How to Download and Use Your Payslip

1. **HRMS Portal**: Most companies have an employee self-service portal (SAP, Workday, Darwinbox, etc.)
2. **Email**: Monthly payslip via email (password-protected PDF)
3. **HR Request**: Physical payslips for very small companies

Uses of your payslip:

• Home/personal loan applications (last 3 months)
• Visa applications (proof of employment + income)
• Rental agreements (proof of income)
• ITR filing (income verification)
• Insurance purchase (income-linked sum assured)

Quick Calculation to Verify Your Payslip

Net Pay = Total Earnings − Total Deductions

If the number doesn't match:

1. Add up all earning components
2. Add up all deduction components
3. Difference should equal Net Pay

If there's a discrepancy, raise it with HR immediately with a screenshot of the calculation.

Use our CTC to In-Hand Calculator to check whether your payslip figures align with your original CTC offer.