We live in an era where money makes life simpler. Employees work hard all round the clock to fulfill their monetary needs, making life productive. And owing to the hard work employees do and also as a right to know, every employee is entitled to a salary slip.
Even though most of the salaried people do get a salary slip which 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 and contains data regarding various aspects of employee’s employment.
Sharing your salary slip has become a necessity when joining a new company. These salary slips are proof for the HR professionals to know about a candidate’s previous emloyment and to finalize a new CTC.
Salary slips are vital in today’s day and a majority of the population doesn’t understand the concept and how to attain one. Or even the salary slip format in India.
Through this article we’ll put a spotlight on aspects such as – what employee pay particulars? Components of employee pay particulars, Importance of employee pay particulars, employee salary slip format in India, etc., among other things.
Starting ahead is everything about employee salary slips that every employee should know as well.
What is employee pay particulars or salary slip?
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, etc.
A salary pay slip is generated in an organization as soon as payroll is proccessed and credited to employees.
Employee salary payslip are most important because they assist in preparing for the Income Tax Returns (ITR) and determes the amount of tax that is to be paid.
Components of employee pay particulars
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.
One can easily generate an employee salary slip by making use of the salary slip format provided in the article. We’ll highlight the components of an employee salary slip.
A) Income Section:
The income section of a salary payslip contains all that the employee is earing for his hard work which includes various allowances the employee is receiving from the organization. Income Section is further divided as follows:
1. Basic Salary
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.
2. Dearness allowance (DA)
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.
3. 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,
5. Conveyance allowance
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.
6. Special 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.
7. Medical allowance
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.
8. 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.
9. Other Allowances
Other allowances can be subject to every individual employer’s discretion and therefore the applicable deduction is also subjective.
B) 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. In most cases, there are 3 deductions:
1. 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.
2. Professional Tax
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.
3. 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 employee pay particulars:
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.
When searching for a new job, most of the HR recruiters ask for a salary slip from the previous employer as it 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, etc:
Anyone who has applied for either a loan or credit card, 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 their salary slip!!
It isn’t manually easy to keep a record of salary deductions which end as savings of the individual. However, a payslip contains valuable information like UAN No. and monthly PF deductions which make it easy, to sum up, the total savings of an employee.
Employee salary slip work as a great assistant for employers when it comes to hiring a new candidate. The salary claims made by potential candidates can be verified and double-checked through salary slips.
Employee salary slips can be availed to enjoy certain free services provided by the government such as medical care, food grains, etc.
Role of HRMS in managing Employee Pay Particulars
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.
After all this, we’re pretty sure you got a gist of what exactly employee pay particulars are, what are the components of employee pay particulars, and importance of employee pay particulars, etc .
The reason top-notch companies opt for a robust payroll software is to process payroll without any errors and to save quality time.
Furthermore, the bright side here is that payroll software already has predefined employee pay particulars and salary slip format that makes it easy for employers to generate and issue their pay particulars and pay slips.
With an HRMS, accessing one’s employee salary details format in excel is no more a burden as all it needs is just a click and a few seconds of your valuable time.