How to Read Your Salary Slip: Every Line Item Explained
Most employees glance at net pay and file the slip away. But every line carries important information about your tax, savings, and statutory entitlements. Here is a complete plain-language guide.
The Structure of an Indian Payslip
Your payslip is divided into two columns: Earnings (what you are owed) and Deductions (what is removed). The difference is your Net Pay — the amount credited to your bank account.
Earnings Side — Decoded
| Line Item | What It Means | Watch Out For |
|---|---|---|
| Basic Salary | Core pay. Basis for PF, HRA & gratuity calculations. | Higher basic = more PF deducted and higher tax |
| HRA | House Rent Allowance. Partially tax-exempt if you pay rent (old regime). | Ensure it’s on your slip to claim exemption |
| Conveyance / Transport | Travel allowance. Fully taxable post-2018. | Standard deduction replaced old exemption |
| Special Allowance | Balancing residual component. Fully taxable. | Often the largest taxable element |
| LTA | Leave Travel Allowance. Exempt on actual travel bills. | 2 journeys in a 4-year block; needs proof |
| Bonus / Incentive | Variable pay. Fully taxable in year of receipt. | May spike TDS in bonus months |
| Gross Earnings | Sum of all earnings above. | ESI eligibility (≤₹21K) based on this |
Loss of Pay (LOP)
If you took unpaid leave, a LOP line appears and all earnings are prorated:
For example: working 23 of 30 days means 23/30 = 76.7% of every component is earned. PF and PT are also recalculated on the lower prorated amounts.
Deductions Side — Decoded
| Line Item | What It Means | Your Money? |
|---|---|---|
| Provident Fund (PF) | 12% of Basic goes to your EPFO account, growing at ~8.25% p.a. | Yes — your retirement savings |
| ESI | 0.75% of gross. Health & social insurance. Only if gross ≤₹21,000. | Yes — funds ESIC medical benefits |
| Professional Tax | State tax. Freein Karnataka (₹300 in Feb) if gross ≥₹25,000. | Gone (but income-tax deductible) |
| TDS / Income Tax | Advance tax withheld. Reconciled through annual ITR filing. | Partly — file ITR to get refund if excess |
| Loan / Advance Recovery | Repayment of salary advance or company loan. | Your advance being recovered |
Net Pay — How to Verify
Cross-check net pay against your bank credit every month. Common causes of unexpectedly lower net pay:
- LOP days (unplanned unpaid leave)
- TDS spike (year-end correction, bonus, or hike)
- February PT (₹300 instead of ₹200 in Karnataka)
- Loan recovery commenced this month
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