Salary Slip – Sample Format, Importance & Components

Salary is something which the organisation provides to its employees in lieu of the work the employees offer for the organisation. Along with the salary which is mostly transferred in the employees account directly, every salaried person receives a salary slip every month which has details of his salary with different components and deductions. Most people do not understand the meaning of the various aspects of the salary slip. Readout everything you need to know about the salary slip to stay alert and aware.

Salary Slip

A salary slip is a documentation of an employee’s salary. It is given to employees by the employer and has a detailed analysis of salary components like LTA, HRA, Bonus etc and also deductions like leaves etc.

Most employers nowadays provide a salary slip through emails. However, some issue it as a hard copy as well. Each and every employer is bounded legally to issue the salary slips to its employees as proof of the salary payments to employees along with deductions.

Why is a Salary Slip Important?

• It forms the basis for Income tax payment
  Salary slip is used to compute one’s income tax. It is required for preparing income tax returns and to calculate the tax amount to be paid or the amount of refund to be claimed for the year.
   

• It provides access to many facilities
  Government provides several facilities like medical care, subsidised food grains and other subsidised facilities which can be accessed by employees only if they have a salary slip.
   

• It helps in taking loans
  Most banks, NBFCs and lenders approve loan application quickly if the borrower is employed as they have an assurance that the loan amount will be repaid duly. Salary slip is thus a key document if you wish to take loans, mortgage, credit or other borrowings.
   

• It helps assess offers
  Salary slip is a great negotiating agent if the employee is seeking a change in job. The employees can also compare the offers given by new employees on the basis of previous salary slips.
   

• It is proof of employmentSalary slip directly reflects that you are employed. It comes handy when one is applying for travel visas or to the universities wherein the applicants need to submit a proof of their designation and employment.

Components of a Salary Slip

The salary slip defines your income and the deductions made from your income.

1. Income

The income part of the salary slip consists of the following components:

• Basic Salary: It comprises of 35% to 40% of the total salary and is henceforth the most important component of salary. On the basis of this, other components of the salary are determined. 
   

• Dearness Allowance: DA is the allowance which is paid to reduce the impact of inflation on the employee. 
   

• House Rent Allowance (HRA): This allowance is paid by the employer for the house rent paid by its employees. It is around 40% to 50% of basic salary and is based on the location of the rented house.
   

• It is the allowance paid by the employer to cover the travel cost between home and work.