How to read your salary slip (every line, explained)

The earnings side

Basic salary is the anchor, typically 40–50% of fixed CTC. PF (12%), gratuity (4.81%) and often HRA (40–50%) are all computed from it. A low basic means lower forced savings but also lower retirement benefits.

HRA (House Rent Allowance) is partially tax-free in the old regime if you pay rent; run the exact math in the HRA calculator. In the new regime it's fully taxable, just like any other allowance.

Special allowance is the balancing figure: whatever remains of your fixed pay after basic, HRA and other named components. Fully taxable, no strings attached.

LTA, telephone, books, meal cards are reimbursement-style components that are tax-advantaged only with bills, and only in the old regime.

The deductions side

EPF (employee share) is 12% of basic (often capped at ₹1,800/month on a ₹15,000 base). It's your money, compounding at 8.25%. See how PF affects your salary.

Professional tax is a small state levy, at most ₹200/month (₹2,500/year) in states like Maharashtra and Karnataka. Delhi and UP don't charge it.

TDS (income tax): your employer estimates your annual tax and deducts 1/12 each month. If this line looks too high, your declared regime or investment declarations are usually the culprit. Verify with the income tax calculator.

A worked example: a ₹12 LPA slip, line by line

Here is what a ₹12,00,000 CTC looks like on a monthly slip, on a standard structure with 50% basic and PF on full basic. The annual figures are the ones your calculator and your Form 16 will agree on; the monthly column is what you actually see.

Component	Annual	Monthly
Annual CTC (what the offer letter says)	₹12,00,000	₹1,00,000
− Employer PF (inside CTC, never on your slip)	₹72,000	₹6,000
− Gratuity provision (inside CTC, paid at exit)	₹28,860	₹2,405
Gross earnings on the slip	₹10,99,140	₹91,595
of which basic salary (50% of fixed CTC)	₹6,00,000	₹50,000
− Employee PF	₹72,000	₹6,000
− Professional tax (Maharashtra)	₹2,500	₹208
− TDS (new regime)	₹0	₹0
Net pay	₹10,24,640	₹85,387

Two things worth noticing. The employer PF and gratuity lines appear in your CTC letter but not in the gross on your slip, and that's the single biggest source of "where did my salary go". And TDS is genuinely ₹0 here, because taxable income stays under the ₹12 lakh Section 87A rebate limit; the same slip at ₹20 LPA carries about ₹13,120 of TDS a month.

Four checks that catch most payroll mistakes

• Basic × 12% = EPF? If your basic is above ₹15,000/month and EPF is exactly ₹1,800, your employer uses the statutory cap. That's fine, but know it slows your corpus.
• Regime check: the slip (or payroll portal) shows which regime you're on. Payroll defaults to the new regime, so if you claim HRA + 80C and wanted old, you must opt in every year.
• Does gross × 12 match your CTC letter? It shouldn't, because the difference is employer PF plus gratuity plus any annual bonus. If the gap is larger than those three, ask payroll what else is being counted.
• Is professional tax right for your state? It is a state levy, capped at ₹2,500 a year. Maharashtra and Karnataka charge it; Delhi and Uttar Pradesh do not. Being charged in a state that has no professional tax is a real and not-uncommon error.

The March problem

TDS is spread across twelve months based on your employer's estimate of your annual tax, and that estimate depends on the investment declarations you submitted in April. If you declared ₹1.5 lakh of 80C investments and actually invested nothing, payroll discovers the shortfall in January–March and recovers the entire difference from your last two or three slips. People who are blindsided by a tiny March salary almost always over-declared in April.

The fix is simple: in December, compare the tax your employer is on track to deduct against what you actually owe using the income tax calculator. If they diverge, either make the investments or tell payroll to revise the declaration, while there are still three months to spread the correction over.

Reconciling your slips with Form 16 and 26AS

At tax time you will hold three documents that should agree. Your salary slips show what was paid and deducted month by month. Form 16, issued by your employer in June, summarises the year's salary and TDS. Form 26AS (and the Annual Information Statement) shows what the Income Tax Department actually received against your PAN.

Add up the TDS across twelve slips; it should equal Part A of Form 16, which should equal the salary TDS in 26AS. If Form 16 and 26AS disagree, your employer deducted tax but the credit has not reached your PAN correctly. Chase payroll before you file, because you can only claim credit for what appears in 26AS. Keep six months of slips accessible: lenders ask for them for home loans, and visa applications frequently do too.

Do these checks quarterly and you'll catch the errors that cost most people real money. (The complete edition below adds the full 12-point audit and copy-paste emails for disputing payroll mistakes with HR.)