We live in an era where money makes life simpler. Employees work hard all round the clock to fulfill their monetary needs, trying to make their life simple. Every employee is entitled to a salary slip owing to the hard work they do and also as their right. Even though most salaried people do get a salary slip that contains employee salary details in excel format, many employers don’t issue one to their employees. And in such a case, all employees need to request every month’s salary slip from their employer as it is a very crucial document. It contains data regarding various aspects of an employee’s employment. Here’s everything about Salary Slips every employee should know:
What is a Salary Payslip?
A Salary Pay Slip is a documented bifurcation of an employee’s salary that every employer is legally bound to issue to each employee, irrespective of the amount of salary received by the employee. A Salary Pay Slip contains income details like basic salary, various allowances, and more along with the deductions made like TDS, PF, and more. You can use payroll software to generate and download employee salary slips. Here’s what an employee salary details format in excel looks like:
Components of a Salary Slip
An employee’s Salary Slip is divided into two parts. One which displays all income and the other which displays all deduction details. To get an even clearer picture, here’s a brief insight:
The income section of a salary slip contains all that the employee is earning for his hard work which includes various allowances the employee is receiving from the organization. Income Section is further divided as follows:
The very first component of your salary is known as “basic” and is generally 35-50% of your whole salary. You can consider this as the real compensation for the work that you do. At junior levels, the basic component is generally higher than the allowances while at more senior levels, the allowances tend to be higher as basic salaries are 100% taxable.
Dearness Allowance is a safeguard against rising inflation. Therefore, it can fluctuate from region to region, however, it generally stays between 30-40% of your basic salary. DA is also considered as “pay” and is therefore taxable.
House Rent Allowance(HRA)
Employees who live in rented accommodations are often offered HRAs by their employers. It can fluctuate between 40-50% of the basic salary, depending on the city of residence. It is not taxable up to a certain threshold because it is considered an allowance and not pay,
Some employers pay a conveyance allowance to their employees. It is the allowance given for the commute that the employee undertakes to get to the place of work. It is not taxable up to a certain limit as it is also an allowance.
These allowances are doled on the basis of the performance of employees. They are given to encourage employees to perform better and hence can vary from company to company. These allowances are 100% taxable.
As the name suggests, this allowance is given to employees to cover their medical bills, provided proof of medical bills in form of receipts and other documents are provided to the employer. If the employee fails to provide proof, he can still receive the allowance but it will be 100% taxable. However, if proof is provided, then tax can be exempted up to a certain amount.
Leave travel allowance
Many employers give leave travel allowance to their employees who like to take trips during their leaves. In order to avail of a deduction on tax, proof of travel must be provided. However, any expenses that the employee occurs during the trip apart from travel are not exempt from taxation. The deduction can be availed on two journeys over a period of 4 calendar years.
Other allowances can be subject to every individual employer’s discretion and therefore the applicable deduction is also subjective.
✂️ Deduction Section ✂️
Now coming onto the deduction section, every employee has to contribute a part of his salary towards the development of the country by paying taxes. Moreover, the government has a few policies in place that work towards ensuring a happy retirement for employees for which deductions from the current salary are made. All these deductions are mentioned in your salary slip. In most cases, there are 3 deductions:
TDS(Tax Deducted at Source)
Employers deduct this amount on behalf of the income tax department. One can undertake various steps to reduce this deduction based on the gross tax slab of the employee. Investment in tax exempt investments such as equity funds, mutual funds, PPFs, NPS, tax saving FDs, etc. can help in increasing an employee’s take home salary. Instruments mentioned under Section 80C in the Income Tax Act, 1961, are deductible if invested in.
Some state governments such as Karnataka, West Bengal, Andhra Pradesh, Telangana, Maharashtra, Tamil Nadu, Gujarat, Assam, Chhattisgarh, Kerala, Meghalaya, Orissa, Tripura, Jharkhand, Bihar, and Madhya Pradesh levy a small amount of tax on professionals. It is a part of the gross tax slab that generally amounts to just a few hundred rupees per month.
EPF(Employee Provident Fund)
Provident funds are an accumulation of funds for the employees’ retirement and it is regulated by the Employees’ Provident Fund Organisation. The funds are contributed to by both the employer and the employee. The employee’s contribution is known as EPF and is usually 12% of the basic salary. A contribution of similar size is made by the employer.
Some part of the EPF is also set aside for the Employee’s Pension Scheme. If an employee’s salary is above INR 15,000, then this contribution will be INR 1,250. If the salary is below that, it will be 8.33% of the EPF. Employees also have the option to opt-out of the EPF up to a certain threshold to invest in better earning investments.
Importance of a Salary Payslip
Filing Income Tax is extremely important but it can get quite complicated. Your salary slip comprises different components such as Basic, HRA, transport allowance, medical allowance, and other types of allowances. These components generally demand different types of tax treatments. Not having a detailed breakdown of these components can land you in legal trouble.
Required when searching for a new job
When searching for a new job, most of the HR recruiters ask for a salary slip from the previous employer. This is because a payslip is an official document that can’t be faked since many employees lie about their salaries too. Therefore, every employee should make sure they have monthly payslips issued to them by their respective employers.
Get Loans, Credit Cards
For anyone who has applied for either a loan or credit card, the lender’s first requirement is a salary slip. A salary slip assures the lender that the individual is working and based on their salary, is capable enough to pay off loans and credit card bills.
Proof of Employment
A salary slip serves as proof of employment everywhere, all around the world. So next time anyone questions your employment, show them your salary slip.
It isn’t manually easy to keep a record of salary deductions which end as savings of the individual. However, a salary slip contains valuable information like UAN No. and monthly PF deductions. This makes it easy to calculate the total savings of an employee.
Avail Government subsidies
You can get the benefit of certain free services and subsidies provided by the government simply by providing the payslip as proof. These services can include food grains from ration shops, medical services, etc.
Role of HRMS in managing Employee Salary Details
The world around us is getting smarter every day, owing to the rapid infusion of technology in every field. And unsurprisingly Human Resource Management is no exception to this advancement. Now more than ever, employers need to embrace an automated HRMS which is a boon for both employers and employees. With an HRMS, accessing one’s employee salary details format in excel is no more a burden. This is because all it needs is just a click and a few seconds of your valuable time.