Salary Slip: Importance

A salary slip or payslip is a document that contains a detailed list of the different components of your salary along with specific job details. An employer issues it each month, either in the form of a printed hard copy or an electronic copy. The payslip should include a company logo along with a name and address. It’s important to understand your slips in wages, though. Although each company has to provide you with salary slips, few businesses even send their employee a print wage slip or email wage slip in PDF format so that the employees can download the wage slip at any time.

What is the Salary Slip?

A salary slip is a document which an employer issues to an employee. It provides a detailed summary of the pay components of the employee such as HRA, LTA, Incentive paid, etc., and deductions over a given period, normally a month. It can be sent on paper or sent to the employee by email. Employers are legally obliged to issue compensation slips annually to their employers as evidence of payroll payments paid to workers and deductions paid.

Why is Understanding Salary Slip Important?

The salary slip for employees is very important as it is the legal proof of earnings and deductions. That is why according to the statute if your employer does not issue it, it is your right to ask for the salary slip. The amount of income tax you intend to pay completely depends on the slip of salary and the amount of income tax return you demand from the government. In addition, salary slip is essential in obtaining loans, credit cards, house, and land mortgage, and in receiving government benefits such as subsidies and medical benefits.

·       A basis for Income Tax payment: The payslip forms the basis for calculating income tax. It helps to prepare the income tax returns and to determine how much tax is to be paid or how much refund the employee will claim for the year.

    Provides access to various facilities: The salary slip gives employees access to various free or subsidized government facilities, such as medical care, subsidized food grains, and so on.

Helps borrow: Salary slips give guarantees to borrowers that their loans will be paid back. Loans, credit, mortgage, and other borrowings are an important document to use.

·       Helps assess offers: Employees can compare new employers’ offers based on their previous payslips. It also helps them negotiate salaries or new roles with new employers.

·       Proof of employment: Salary slips are important legal proof of employment. Often, applicants are asked to furnish a copy of their salary slip as proof of employment and designation while applying for travel visas or to universities.”

Format of Salary Slip

·       Company name, logo and emails, month and year Pay Slip

·       Employee Name, Code of Workers, Department classification

·       PAN / Aadhair employee, bank account number

·       UAN (Universal Account Number) EPF Account No.

·       Total working days, effective working days, leaves count

·       List itemized of earnings and deductions

·       Gross pay and net income, in terms of numbers and words

What are the Components of a Salary Slip?

Manual or e-slips for a wage in wage slip format have been considered a legitimate document of evidence. Some kind of tampering with information or misrepresentation as mentioned above is grounds for legal action against the perpetrator.

·       Income and exemptions

·       Deductions

·       Personal Details including leave information

Income and exemptions

Income and Salary

·       Basic Salarys: It reflects 40-50 per cent of the individual’s overall income. This is the base salary on which a variety of amounts such as HRA, PF, Accommodation Precondition.

·       Dearness Allowance: Another basic part of income and that is useful in determining the benefits as well as the deductions including basic salary. The basic income is entirely taxable.

·       Performance Bonus: It is the compensation for exceptional professionalism and excellent job performance provided to the employees. This too is taxable

·       Commission: Compensation is given to certain employees like the sales department for increasing the business’ turnover and some percentage of the turnover is awarded to the employees as commission according to the same. A mandate is a contract

·       Arrears: If a company pays any arrears (unpaid due) for any of the preceding working months.

·       Overtime Compensation: If there is any kind of monetary compensation for the extra hours (overtime) dedicated to an organization by an employee, it is shown in the field of overtime compensation.

·       House Allowance for Rent: An organization’s compensation for monetary aid to pay his house’s rent is known as house rent allowance. For the house rent payment, an exception is allowed.

Deductions

·       Provident Fund: The provident fund provides a fixed income and dearness payment of 12% deduction. This is a two-way contribution from the employer as well as the employee. The payslip describes only the effort the employee made.

·       Professional tax: This is a tax deduction levied on salaried professionals by the State government. The amount levied will vary by state. Learn more about the professional tax or sign up for professional tax enrolment

·       Tax Deducted at Source: (TDS) The tax sum deducted from the salary paid to the Central Government each month by the employer.

What are the Benefits of Salary Slip?

·       Understand how much tax you pay: slips of wages will show your real cash and income tax in hand. Those two are probably the most important pieces of information for us.

·       Figuring your retirement savings: The employee and employer contribution for PF can be exactly determined using the salary slip.

·       Background checks: Salay slips are one of the most important factors when you change jobs or go to higher studies. Admission team and employers seek pay slips to validate your pay claims. In the event of a job change, the amount and structure of your wage will depend on your hike.

·       Having loans from banks: Your salary slips are a major factor in determining your potential to repay your loan and therefore determining your loan amount.

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