Payslip format with validity, importance and components of payslip

Hello, in this post we will discuss about the Salary slip or Payslip format along with different components of payslip. We will cover the following:

What is Payslip?

Payslip is a document which an employer provides to the employee as proof of salary. It contains the description of all income earned, exemptions, deductions and taxes cut from your salary. Employers can share the payslip with employees in paper or mail format. Both the type of payslips hold the same importance and validity.

Importance of Payslip

    • It acts as an important legal proof of employment
    • You can avail loans, mortgage or other borrowings with the help of Payslip as it assures that their lending will be repaid.
    • It is an important proof of income which helps you file income tax returns.
    • Having a valid payslip helps you to access to various facilities provided by the government like medical care etc.,
    • It helps in negotiating salary with new employers for better pay

Manual and computerized payslip is valid proof of document. Modifying an issued payslip is considered a criminal offense. So an employer has to ensure that employees will not be able to modify the payslip. For this purpose, payslips are generally given in PDF format.

Components of Salary Slip or Payslip

  1. Income or earning
  2. Deductions
  3. Leaves (Optional)

Income

All the income, gains are located on the left side of the payslip. Let us take a look at the different types of income below.

Basic Salary

This is the basic and main component of income. The percentage of Basic differs from company to company. It is the basis for the calculation of various other components of the payslip. Basic is fully taxable.

Dearness Allowance (DA)

Dearness Allowance should neither be high nor low. It is paid to reduce the impact of inflation on the employee. In some companies, DA is an optional head of salary.

House Rent  Allowance (HRA)

It is an allowance to pay out the house rent of the employees. Employees can claim exemption on this by submitting rent receipts.

Conveyance Allowance

It is an allowance for an employee to cover his / her expenses of travel from home to work and work to home.

Other Allowances

There can be various other allowances according to the company policies. These can be uniform allowance, special allowance, city conveyance allowance, child education allowance etc.

Reimbursement

Reimbursement can also be shown as income in the payslip of the employee. Reimbursements for fuel, medical and food coupon will come under this head.

Deductions

All the deductions are located on the right side of the Payslip. Deductions can be statutory or based on company policy.

Provident Fund (PF) – Statutory

It provides retirement benefits or savings to the employee. PF is calculated on (Basic+DA) (Cut-off at Rs. 15,000). Only employee contribution of 12% on (Basic+DA) can be seen in the payslip of the employee.

Employees’ State Insurance (ESI) – Statutory

It provides medical facility to all eligible employees. The deduction towards ESI compulsory. The cut off is Rs. 21000. Employee contributes 1.75% on gross salary.

Professional Tax (PT) – Statutory

It is a tax collected by the state government from all salaried employees. PT depends on state to state government. It is calculated on the gross earnings of the employee. Gross earnings are the sum of all income.

Tax Deducted at Source (TDS) – Statutory

The amount of tax deducted by the employer on behalf of the Income Tax Department from the salary of the employee.

Payslip Format

Earnings Deductions
Basic 20000 PF 2880
DA 4000 PT 200
HRA 9600 TDS 4042
CA 800  Other deductions  2000
Other allowances 5600
Total 40000 Total 9122
Gross salary = 40000
Net salary = 30,878

Payslip-format

Download the Payslip Format

This ends the post on the format of Payslip. Let us know your opinion by commenting below.

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