A salary slip consists of many terms that go above our heads sometimes. Every professional or employee should know what they are getting paid for, the deductions in their salary, tax rate, etc. There are so many people who do not know the difference between their basic salary and total salary and think that both the terms are used for the same thing, which is not the case at all. Here are the terminations that will help you understand every aspect of your salary slip.
What are the essentials of a salary slip?
Salary slip contains the following details-
- CTC- CTC refers to Cost to Company. The term is used for the total salary package that is released whenever an employee is hired in an organization. The amount indicates the total expenses made by the employer on the particular employee for the particular year.
- Basic salary- It is generally 35 to 50 per cent of the total salary. It is completely a taxable amount that is received by the employer in hand.
- HRA- The abbreviation refers to the House Rent Allowance and is 40 to 50 per cent of the basic salary. The allowance is given to the employee so that he can pay off his rent. The amount differs depending upon the location. The tax could be exempted on this amount based on the following situations, whichever is lowest-
- House rent minus 10 per cent of the basic salary.
- According to the allotted or fixed House Rent Allowance.
- 40 per cent of the basic pay.
- Medical allowance- The amount is given to the employee till the period he is in the organization in order to support his medical expenses. The employee is bound to show proof of the incurred medical expense such as a medical bill. The amount is generally a reimbursed expense. The tax can be exempted on the allowance up to Rs. 15,000 annually if medical bills and other proofs are there.
- Leave travel allowance- The amount covers the employee as well as his immediate family members’ cost of travel while the employee is on leave. The employee can use this allowance and deduct the expense to an extent by showing proof of the journey. The tax exemption is only applicable for a maximum of two journeys in four years.
- Provident fund- It is an amount deducted from the basic salary and consists of 12 per cent of the same. The amount is diverted to the government initiated body called the Employees’ Provident Fund Organization. The contribution of the amount depends upon the terms and conditions of the organization.
- TDS- It refers to the Tax Deductible at Source. The employer deducts the amount on behalf of the Income Tax department on the basis of the overall tax slab. A challan named ITNS 281 is issued in order to deposit the TDS. To know more about the challan and TDS deposits you can always visit here.
If you have any queries regarding any entry in your company-specific salary slip format you can find its meaning by clicking here.
It is important to know the additions and subtractions in the basic salary to have a thorough understanding of the salary slip. This also helps when an employee is shifting to another job or organization in order to compare the benefits given by both companies.