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What is a Salary Slip?
A salary slip or a salary pay-slip is a legal document that is issued by an employer to an employee, as proof of salary payments made to employees, and the deductions made from their salaries. It is issued every month as a hard copy or an e-statement, and contains a detailed description of the salary components like HRA, Bonus, LTA, etc. and deductions made from the employee’s salary for that month.
Who gets a Salary Slip?
The privilege of receiving a salary slip is enjoyed by salaried employees only. The employer is responsible for issuing a copy of the salary slip every month. Smaller companies may not be able to regularly provide a salary slip so employees working there need to ask their employer for issuing a Salary Certificate instead. Most employers provide digital salary slips, others may provide hard copies.
Salary Slip Format
There are numerous salary slip formats used by different companies as per their convenience. A basic template for a salary slip contains the following components:
- Company’s name, address and year of establishment, monthly and yearly salary amount.
- Employee’s name, code, designation and department.
- Employee’s PAN/ Aadhaar and Bank Account Number
- EPF Account Number and UAN, i.e., Universal Account Number.
- Total number of work days, number of effective work days and number of leaves
- List of Earnings and Deductions.
- Gross and Net Pay in numerical form, as well as in words.
Getting a sample salary slip helps employers to create their own version of salary slip template that can be furnished with details and issued to their employees. One can find numerous salary slip formats all over the internet and use simple desktop applications like MS Excel or MS Word for the generation of the same. The basic components would more or less remain the same in both cases.
How To create Salary Slip Online
- Once you download the salary slip format (word/excel/pdf), you will be able to edit it as per your requirements. However, it must be noted that editing could be done only in word and excel formats.
- To create your salary slip in word/excel formats, you need to enter the basic details such as name, residential address, organization’ name, organization’s address, etc.
- After entering all the details, you can take out a color/black and white print out of the document and get it verified by the organization head with the organization stamp and signature.
Download Salary Slip Format In Excel, Word, PDF
Salary Slip Format in Excel:
Salary Slip Format in Word:
Salary Slip Format in PDF:
Salary Slip Format in Doc:
Importance of a Salary Slip
For income tax calculation :
Salary slips are needed for proper calculation of the payable amount of income tax, and also for calculating the amount of refund to be claimed for a financial year.
For accessing Government Facilities:
Monthly salary slips provide an opportunity for employees to gain access to various government schemes such as state-run medical care, low rates for food grains and many other government subsidies.
If an employee wants to claim various bank credits, apply for loan, etc. then his or her employee salary slip plays a vital role in deciding the credit limit. All financial institutions have made it mandatory to submit a salary slip before Applying a loan. This is needed to assess someone’s creditworthiness and ability to repay the loan in a given amount of time. Employee salary slip provides an assurance that the employee is capable of repaying the loan to the financial institution.
Employee salary slip can be used by an employee for negotiating the new salary with a potential new employer. This proves as a bargaining point for both employees as well as the employer. Current salary slip can help an employee to structure his/her negotiation in favour of a hike in salary, whereas it also helps the (future) employer to reach a deciding salary amount.
A salary slip is an essential legal proof of valid employment at a particular institution. These days, while applying for visas, it is necessary to furnish employment details along with monthly salary slips.
What are the Components of Salary Slip?
A salary slip consists of a detailed breakdown of an employee’s salary. However, pay-slips can be broadly broken down into two major groups: Income and Deductions.
The basic salary of an employee forms around 35-50% of the entire salary. This is a very important part of the salary as most of the calculations for the rest of the slip are majorly dependent upon it. It is higher for senior-level employees and less for junior-level employees. It is 100% taxable, it is part of in-hand and if an employee has a big amount as basic salary then his tax will be high. An employee’s house rent allowance and the employee provident fund are also linked to the basic salary.
Dearness Allowance (DA)
DA is the cost of living adjustment allowance which the government has to pay to the employees and pensioners of the public sector.. It is a fixed percentage of the basic salary and is aimed towards covering against the impact of inflation. Due to that, DA remains directly linked to the cost of living and is different for different employees depending upon their location. It is fully taxable for salaried employees and is part of in-hand.
House Renting Allowance (HRA)
The employees living in rented houses can avail the benefit of HRA. It depends on the city of employment. If an employee is a resident of a metro city then HRA is 50% of the basic salary otherwise for rest of the cities it shall be 40% of the basic salary. HRA is exempted from income tax up to a certain limit, if you pay rent. The exemption is calculated as follows: Minimum of
- Annual rent paid-10% of basic salary+DA
- Actual HRA received
- 50% of (basic + dearness allowance) if the location is Mumbai, Kolkata, Chennai, Delhi or 40% of (basic + dearness allowance) for other cities.
Note: Exemption is available even if the employee has his own house but cannot stay there due to his employment in another city.
Conveyance Allowance is the amount of money given by an employer to an employee to travel from home to work, and again go back to home. It is exempted from the Income Tax to a specific limit. This exemption amount is a minimum of INR 1600 per month of conveyance amount in an employee’s salary slip.
Leave Travel Allowance (LTA)
When an employee is on a leave with a family member on account of travel, then the Leave Travel Allowance covers the cost of the travel. However, it is noteworthy that to claim the LTA, the employee needs to submit an actual proof of travel. Besides, LTA is applicable just for 2 days leave in the entire year and other expenses incurred during travel cannot be claimed.LTA is exempted from tax if an employee has travelled twice in four consecutive years.
If an employee happens to meet an accident or any other type of injury during his employment at a particular firm, then he can claim his medical allowance. It is necessary to submit proof of all the expenses made by the employee in order to have the claim passed. If the employee fails to submit medical bills, then he would get the allowance but it would be fully taxable. Normally a medical allowance is exempted from tax up to INR 15000.
This is offered by a company to an employee as an appreciation for their extra hardwork. It is offered to motivate and encourage the employees. It is 100% taxable and in general part of in-hand.
There are some other tax saving allowances too which depend on the company an employee is working for. These are helpful for claiming income tax rebate. Some of these are taxable while others are not fully taxable.
Deductions furnished in the Salary Slip
Employee Provident Fund (EPF)
This is a compulsory deduction from an employee’s salary. EPF is at least 12% of an employee’s basic salary, and is diverted into an EPF account. An employee’s contribution towards his or her EPF enjoys an exemption from Income tax.
This is the minimal amount of tax deducted from an employee’s salary every month and paid to the government. Such a deduction is made in accordance with the tax slab provided by the state government.
Tax Deductible at Source (TDS)
This refers to the amount of tax deducted by the employer and paid to the Income Tax Department on behalf of the Income Tax department. An employee can reduce his TDS by investing in tax saving schemes and submitting the required documents to his employer.
How to make a Salary Slip?
As an employer one needs to design his/her pay-slip in consultation with the HR, CA or the accounts person of the company. The salary slip format is an important systematic structure required to furnish the financial information of an employee’s salary per month.
Manual salary slips are almost obsolete these days. Most of the firms practice providing digital salary slips, broadly known as e-salary slips. Here are some of salary slip formats. You can pick one that suits your needs best.
Difference between Cost To Company (CTC) and in-hand/ Gross Salary
Cost to Company is the amount an employer will have to spend on an employee in a year. It includes salary, reimbursements, contributions and tax benefits as well. On the other hand, in-hand or gross salary refers to the amount received by an employee as salary, before any deductions are made. Gross salary includes the basic amount, Direct Allowance (DA), House Renting Allowance (HRA) and other allowances, and is devoid of PF, gratuity, among certain other things.
Benefits of a Salary Slip
- Knowledge of Tax Paid: Salary slips will show how much cash an employee actually has in hand and forms the basis for income tax calculation.
- Figuring out PF: The salary slip helps an employee find out the exact amount paid for your Provident fund (PF).
- Employment Proof: Salary slips work as legal evidence of one’s employment. While applying for visas or universities, people are often asked to furnish a copy of their salary slips.
- Helpful in Background Checks: While going for another job or for higher studies, salary slips prove to be an important background check. Potential employers check peoples’ salary slips to confirm their salary claim.
- Applying for Loans: When it comes to an employee’s loan repaying potential, financial institutions check his or her salary slips for credibility.
How does the knowledge of Salary Slip help one increase his take-home salary?
There are a number of details about an employee’s salary furnished in his salary slip. One could analyze these details and increase his take-home salary as a result. Here are a few tips as to how to do that:
- The easiest way would be to decrease the basic pay and adjust that as long term benefits or perks. A higher basic salary would translate to a higher HRA, DA and Provident Fund (PF) as well. The Dearness Allowance (DA) is taxable and the PF contribution would reduce your take-home salary.
- Get rid of the special allowance because that is fully taxable. Instead, adjust it towards tax-free and long term benefits.
- Make sure to avail the maximum benefit from your travel allowance which is INR 19,200 per year.
- Also, try to get the maximum benefit from Medical allowances, which is INR 15,000.
- The variable pay is fully taxable. So, you need to negotiate it to the lowest.
Legal Validity of Manual & Digital Payslips
Digital and manual payslips, both hold the same status when it comes to legal status. Any kind of tampering or alteration with a monthly payslip is a criminal offense. Disputes regarding wage are usually resolved in labour courts. Such cases have witnessed a huge drop since most of the firms have begun digitally transferring salaries to their employees, directly into their bank accounts.
What do you understand by a Salary Certificate? How is it different from a Salary Slip?
A salary certificate is a signed certificate on a company’s letterhead and is stamped by authorized people working in that company. It certifies that a person had been working with a specific firm for a certain period of time in exchange of their services.
A salary certificate is very different from a salary slip as this certificate does not furnish the detailed breakup of an employee’s salary. A salary slip, on the other hand, presents a detailed list of income and deductions made in a month from an employee’s salary.
The purpose of a salary certificate is only for providing a proof of employment, and it may not necessarily indicate the financial standing of an employee. On the other hand, a salary slip, besides providing proof of employment, also gives detailed information about the financial standing of an employee.