A payslip is the one-page monthly document that shows you exactly where your salary went. One column lists what you earned (basic pay, HRA, allowances), the other lists what got subtracted (PF, ESI, professional tax, income tax), and the number at the bottom is what actually landed in your bank account. Indian employers must issue these under the Payment of Wages Act, 1936, and the Code on Wages, 2019 widens that rule to cover every salaried worker in the country.
Key Takeaways
- A payslip splits into earnings (basic, HRA, DA, special allowance) and deductions (PF, ESI, PT, TDS, loan recoveries)
- Basic plus DA must be at least 50% of total pay under the Code on Wages, 2019
- PF takes 12% of basic from the employee’s side; ESI takes 0.75% of gross (for workers earning up to ₹21,000/month)
- Employers face penalties under Section 20 of the Payment of Wages Act for missing or inaccurate salary slips
What Shows Up on a Payslip Before the Numbers?
The top portion of any salary slip carries identification data. Name, employee ID, PAN, UAN for PF, the department, designation, bank account details, and the pay period (something like “May 2026” or “01-May-2026 to 31-May-2026”). This block rarely changes month to month unless someone switches departments or updates their PAN.
Below this header, the slip splits into two halves. Left side: earnings. Right side: deductions. Here is the standard layout most Indian payroll systems follow:
| Earnings | Deductions |
|---|---|
| Basic Salary | Employee PF |
| HRA | Employee ESI |
| Dearness Allowance | Professional Tax |
| Special Allowance | TDS (Income Tax) |
| Conveyance / Medical / Other | Loan or Advance Recovery |
| Overtime or Incentives | Other Deductions |
| Gross Salary | Total Deductions |
| Net Pay = Gross minus Deductions |
The numbers on the left add up to gross salary. The numbers on the right add up to total deductions. Subtract right from left, and you get net pay.
The Earnings Side: What Builds Your Gross Salary?
Not all earning lines carry the same weight. Basic salary sits at the foundation because PF, gratuity, and leave encashment all calculate off it. HRA matters only if you rent a house and want the tax break. Special allowance is just whatever CTC amount did not fit into the other buckets. Let me walk through each one, though some deserve more space than others.
Basic salary is the single most consequential line on the slip. The Code on Wages, 2019 says basic plus DA must make up at least 50% of total remuneration. Plenty of companies still run a 40% basic structure from five or six years ago, and they will need to restructure once the Code gets enforced. Why does this matter to you? A higher basic means more goes into your PF account (good for retirement) but also means a larger PF deduction from each month’s pay. A warehouse supervisor in Bhiwandi with a CTC of ₹4,20,000 would need basic plus DA of at least ₹2,10,000 per year under the new rule. For a full walkthrough of how CTC, gross, and net relate, see our CTC vs gross vs net salary guide.
HRA gets its own line because it carries a tax exemption under Section 10(13A) of the Income Tax Act. The exemption depends on three numbers: actual HRA received, rent paid minus 10% of basic, and 50% of basic for metro cities (Delhi, Mumbai, Chennai, Kolkata) or 40% for everywhere else. Whichever of the three is smallest becomes your exempt amount. A retail store manager in Andheri paying ₹18,000 rent, for example, would run this three-way comparison to figure out how much HRA escapes tax. If you do not pay rent at all, the entire HRA amount becomes taxable.
DA (dearness allowance) adjusts for inflation. Government employees see this line prominently because their DA revises twice a year based on the All India Consumer Price Index. Most private-sector companies in 2026 skip this row entirely and fold the amount into basic. If your payslip has no DA line, that is normal for a private job.
Special allowance is the leftover. After the employer assigns basic, HRA, DA, and any named allowances, the remaining CTC surplus lands here. Fully taxable. No exemptions. Think of it as the plug number that makes the maths work.
Smaller allowances like conveyance, medical, or telephone vary by company. Conveyance allowance lost its standalone exemption after the 2018 budget introduced the ₹50,000 standard deduction, so it no longer saves tax the way it once did.
The Deduction Side: What Gets Subtracted?
Here is where the gap between gross and net pay shows up. Some of these deductions exist because the law says so, and some exist because you chose them.
PF (Provident Fund) takes 12% of your basic-plus-DA every month and routes it to your EPF account. The employer puts in a matching 12%, though the employer’s share splits between EPF (3.67%) and the pension fund EPS (8.33%, capped at a basic of ₹15,000). The EPFO contribution rate schedule has the full breakdown. On your payslip, only the employee’s 12% appears as a deduction. The employer’s contribution does not show up in your earnings column either, which is why CTC and gross salary never match.
ESI applies only when gross wages stay at or below ₹21,000 per month. The employee pays 0.75%, the employer pays 3.25%. A garment-line stitcher in Tirupur drawing ₹19,500 gross would see about ₹146 cut for ESI. Once gross crosses ₹21,000, ESI drops off the payslip entirely. Our ESIC registration guide covers who qualifies and how contributions work.
Professional tax is a state-level charge, and not every state collects it. Maharashtra, Karnataka, Gujarat, West Bengal, Tamil Nadu, and Andhra Pradesh do. The constitutional cap under Article 276 is ₹2,500 per year, though monthly slabs differ by state. In Maharashtra, employees earning above ₹10,000 per month pay ₹200 (₹300 in February as an annual adjustment).
TDS is the income tax your employer withholds each month. The annual tax liability, based on your slab and declared investments, gets divided by 12 and deducted monthly. At year-end, the employer issues Form 16 summarising all TDS pulled during the financial year.
Loan recoveries and other cuts. If you took a salary advance before Diwali or have an ongoing staff loan, the monthly recovery instalment shows up here. Voluntary contributions to NPS or food coupon deductions also fall under this bucket.
How Do You Read a Payslip Step by Step?
Five checks, two minutes.
- Pay period. Does it say the right month? Sounds obvious, but a payroll processing error in April 2026 at a multi-branch electronics retailer in Lajpat Nagar once credited March salaries with April dates because someone ran the wrong batch. The store manager caught it only because the pay period said April while the bank credit came on 7th April for March work.
- Earnings total. Add up every row on the left. Does it match the gross salary number printed at the bottom of the earnings block?
- Deductions total. Same drill for the right column. PF plus ESI (if applicable) plus professional tax plus TDS plus any recovery.
- Net pay versus bank credit. Gross minus deductions should match what appeared in your bank account within ₹1-2 (rounding differences happen).
- Leave balance. Some payroll systems print CL, SL, and EL remaining at the bottom. Worth a glance in November or December when encashment windows open at many companies.
Flag discrepancies with HR within the same pay cycle. Once payroll closes for a month, corrections usually spill into the next month as arrears, which creates confusion on two payslips instead of one.
Why Do Payslips Matter for Employers?
A factory in Chakan gets a labour inspector visit in January 2026. The inspector asks for wage registers and salary slips from the last six months. If the records are incomplete or the slip format does not match the Payment of Wages Act requirements, penalties follow under Section 20. The labour law compliance checklist covers the full set of registers employers must keep.
Beyond inspections, payslips serve as income proof. Banks processing home loans ask for three months of salary slips. Visa consulates request them. A hospital administrator in Bopal applying for a housing loan in March 2026 needs those slips to verify steady income. If your payroll system does not generate clean, downloadable slips, your staff ends up asking HR for manual letters every time they need proof.
Across 30,000+ businesses on Petpooja Payroll, salary slips generate on the last working day of each month and land in every employee’s self-service portal without HR lifting a finger. The Payroll software handles the formatting, the PF/ESI/TDS calculations, and the PDF download, so the compliance burden stays off the admin team’s plate.
Conclusion
Your payslip is a monthly receipt of your labour. The left column shows what the company owes you. The right column shows what the government and your own savings commitments take out. The bottom number is what you actually get.
For employers running businesses in India, getting this document right on the 7th of every month is not optional. It is law.
Frequently Asked Questions
Yes, under the Payment of Wages Act, 1936, and broadened by the Code on Wages, 2019. Penalties apply under Section 20 for non-compliance. Download a ready-to-use payslip template if you need a starting format.
Gross salary is the sum of every earning line before anything gets subtracted. Net salary is what survives after PF, ESI, professional tax, TDS, and loan recoveries are removed. The net number matches your bank credit.
CTC bundles in the employer’s PF contribution (12% of basic), employer ESI (3.25% of gross), gratuity provisioning, and sometimes insurance premiums. None of these show up as earnings on your payslip because they flow to government accounts or company reserves, not to your bank. Use our CTC salary structure calculator to see the full split.
Monthly, for every pay cycle. The Payment of Wages Act requires salary payment by the 7th of the following month for establishments under 1,000 workers, and by the 10th for larger ones.
No. The Act restricts deductions to categories it lists. Anything outside that list, like a random “admin fee” or an unapproved recovery, is illegal. The garnishment glossary entry explains the narrow exceptions where courts or government orders can mandate additional deductions.
