People operations
Reading an Indian payslip, line by line
Most employees have never had a payslip explained to them. Most HR teams answer the same five questions about it every month. Here is the whole document, in order.
- Written for
- HR teams who answer payslip questions, and employees who have them
- Companies on HRMagix
- 120+
- Employees managed
- 9,000+
- Integrated modules
- 12
- Free trial, no card
- 14-day
A payslip is a compressed document. It records a month of attendance, a salary structure, four or five statutory rules and a bank transfer, in about twenty lines. Nobody is taught to read it, and the result is that the same handful of questions reaches HR every month.
This is the whole document in the order it appears, with what each line means and what it is derived from.
The header: the part that determines everything below
- Pay period and pay date, the month the slip covers, and when money moved. They are frequently different, and a query about a missing credit is usually about the second.
- Payable days and loss of pay, the output of the attendance and leave ledger for that month. Every earnings line below is scaled by this.
- UAN, the Universal Account Number that follows an employee across employers and holds their provident fund.
- PAN, required for TDS to be deducted at the correct rate rather than a higher default.
If a payslip looks wrong, start at payable days. Nine times out of ten the earnings are correct for the days recorded, and the actual dispute is about a day of attendance rather than about pay.
Earnings
Basic
The foundation of the structure, and the figure most statutory calculations reference. Provident fund is computed on basic (with dearness allowance where it applies), and gratuity is computed on last drawn basic. A structure with an unusually low basic reduces present deductions and reduces future gratuity at the same time, which is worth understanding rather than discovering at exit.
House Rent Allowance
Paid as part of the structure, and separately relevant at tax time: an employee paying rent may claim exemption against it under the old regime, subject to the statutory computation and to producing rent receipts. The allowance appearing on the payslip and the exemption claimed at year end are two different things.
Other allowances and variable components
Conveyance, special allowance, shift and night differentials, overtime and any one-off components. On a shift-based payroll this is where the month-to-month movement lives, and it is the reason gross varies even when basic does not.
Deductions
| Line | Rate | Computed on | Where it goes |
|---|---|---|---|
| LineProvident fund (employee) | Rate12% | Computed onBasic + DA, subject to the ₹15,000 statutory wage ceiling where the employer applies it | Where it goesThe employee's EPF account under their UAN |
| LineESI (employee) | Rate0.75% | Computed onGross wages, where the employee is within the ₹21,000 threshold | Where it goesESIC, funds medical and cash benefits |
| LineProfessional Tax | RateState slab | Computed onSalary, per the state of the work location | Where it goesThe state government |
| LineTDS | RatePer the employee's regime and declarations | Computed onEstimated annual taxable salary, spread monthly under Section 192 | Where it goesIncome Tax Department, against the employee's PAN |
The employer also contributes 12% for provident fund and 3.25% for ESI. These do not reduce take-home and often do not appear in the deductions column at all, which is the source of a persistent confusion addressed below.
Gross, net and CTC are three different numbers
This is the single most common misunderstanding, and it is entirely reasonable, the three are rarely explained together.
- Gross, everything earned for the month before any deduction.
- Net (take-home), gross minus employee deductions. This is what reaches the bank account.
- Cost to company, gross plus the employer's own contributions. It is higher than gross and is never the amount anyone receives.
An offer quoted in CTC and a payslip showing net are two ends of the same structure, and the gap between them is mostly employer statutory contribution, money that belongs to the employee, but sits in their provident fund rather than their bank.
What an employee should be able to do without asking anybody
Retrieve any payslip ever issued to them, see the leave balance the payslip's loss-of-pay figure came from, raise a regularisation if a day is wrong, and at year end compare their liability under both tax regimes before declaring. In HRMagix all of that sits behind the employee's own login, on web and on the mobile app.
That is the actual argument for self-service. Not that it saves HR time in the abstract, but that the person best placed to spot an error on a payslip is the person it belongs to, and they can only do that if they can see it.