Your offer letter said Rs 60,000 a month. Your bank account says something smaller. Most people shrug and assume "tax," but a salary slip tells you a lot more than that, and a few minutes reading it can catch mistakes, show you money you're saving without realising it, and help you budget on the right number.
Here's how to read one, line by line.
The top half: what you earn
- Basic salary. The core of your pay. It matters more than it looks, because retirement contributions and often the festival allowance are calculated on basic, not on the total.
- Allowances. Dearness, grade, transport, communication, and so on. Some employers keep basic low and allowances high.
- Gross salary. Basic plus allowances. This is the "Rs 60,000" number.
If your basic is a small share of your gross, your retirement fund grows more slowly than you might expect. That's worth knowing when you compare job offers.
The bottom half: what comes out
- Retirement contributions. Under the Social Security Fund (SSF), the employee's share is deducted from your pay and the employer adds a larger share on top, all based on basic salary. If your employer uses EPF and CIT instead, you'll see those lines. I explained the difference in my EPF, CIT and SSF post.
- Income tax (TDS). Your employer estimates your tax for the whole year and deducts it month by month. That's why the number can jump in the month you get a festival allowance or bonus.
- Other deductions. Loan repayments to the employer, advances, insurance premiums through payroll, staff welfare funds.
- Net salary. What actually reaches your account.
An illustrative slip
- Basic: Rs 40,000
- Allowances: Rs 20,000
- Gross: Rs 60,000
- SSF, your share (11% of basic): − Rs 4,400
- TDS (illustrative): − Rs 1,500
- Net to your account: Rs 54,100
Some slips also show the employer's contribution (in this example, Rs 8,000) as both an addition and a deduction. It never lands in your bank account, but it's still your money, building up in the fund. Together, that's Rs 12,400 a month of retirement saving you might not have counted.
Budget on the net, not the gross
This sounds obvious, but a lot of people plan their spending, rent or EMI around the offer letter number. Your monthly budget should start from the net salary on an ordinary month. Treat the festival allowance and any bonus as separate, and give them a job in advance, like the Dashain fund from my festival spending post.
The same goes for loans. When a bank asks about your income, it may look at gross, but you'll be paying the EMI from net. Check the real cost of the loan against the net number.
Things worth checking
- Is the retirement money actually deposited? A deduction on your slip is a promise. Check your SSF, EPF or CIT statement every few months to make sure the money arrived, with the employer's share too.
- Are your tax deductions counted? Retirement contributions and some insurance premiums can reduce your taxable income, up to limits set in the tax rules. If you pay a life or health insurance premium yourself, give your employer the receipt so the TDS reflects it.
- Is the TDS reasonable? Ask HR or accounts how they calculated it. Mistakes happen, especially after a raise or a mid-year job change.
- Keep your slips. You'll need them for loan applications, visa applications and to check your tax at the end of the year. Save a copy of each one somewhere you can find it.
A quick checklist
- Note your basic salary and what share of gross it is
- Find the employee and employer retirement contributions
- Check those contributions on your fund statement
- Give HR your insurance premium receipts
- Build your budget on net salary, with allowances kept separate
- Save every salary slip
General information, not tax or personal financial advice. The salary slip is illustrative and the TDS figure is made up. Contribution rates, tax rates and deduction limits are set by law and can change, so check with your employer, the SSF or the Inland Revenue Department for current rules. Have a question? Leave it in the comments.
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