The relationship between the employer and the employee is a delicate and intricate part of every company. One of the major factors that helps a company in running smoothly and efficiently is based on how effectively the employer and employee work together. A major element among everything else that determines this relationship is salary slips or payslips. Every company or business can run smoothly only when the relationships within it are strong and healthy.
Ethical standards and procedures help to maintain the feeling of confidence between the employees and also between employees and employers. These give rise to habits of clarity among the people working together. Salary slips are one such document that helps in creating a clear channel regarding salary, and a good understanding of this is essential to run a company smoothly.
lips are one of the most important documents that the employer issues for the employee. These documents help us to understand the different aspects and components of the salary slip, such as the LTA, HRA, etc. The bonus amount or deductions that are given to the employee within a certain time period (which is a month) are also specified here. It may be either sent to the employee via email or issued in paper, whichever way is convenient for both.
A salary slip is very important, and the law binds the employer to issue salary slips to each of their employees at different specified intervals of time. The salary slip is a sort of proof of payment of salary to the employee. Since it also shows the additional or bonus amount along with the deductions, salary slips will help both the parties to keep track of all of the payments from one party transfers to another.
Salary slip Format
A basic salary slip has all the necessary details that the employee must know. Since it helps in keeping track of the different types of payments taking place, it has several divisions. A simple salary slip consists of the following information-
- Company name or name of the employer
- Logo and address of the company
- Name of the employee
- Employee code
- Name of the bank
- Personnel number
- Date of birth
- Designation and department
- Employee Identification (Aadhar, PAN, etc.)
- Total work days (practical workdays and leave days)
- List of earnings
- Basic and DA
- Provident fund
- S. I
- Profession Tax
- TSD/ IT
- Total Addition
- Total Deduction
- Full salary (gross pay and net pay in both numbers and words)
- Cheque Number
- Account number
- The month of salary payment
Let us take a look at the format of a simple salary slip-
Salary Slip components
Let us now get a proper understanding of the different components that are basic in salary slip.
- Income- the income or earnings of an employee consists of –
- Basic salary: an approximate 30 to 40% of the salary is the basic salary. This helps in determining the rest of the components that combine to form the salary.
- Dearness Allowance or DA: this helps in challenging the impact of inflation in prices. This is typically present in the case of government employees and is completely taxable. This must reflect in all the tax returns filings.
- House Rent Allowance or HRA: this allowance helps employees to pay off their house rent if any. This allowance depends upon your basic pay, and it comprises of 40%-50% of your salary.
- Performance and special allowance: acts as a motivational push to improve the performance of the employees.
- Other Allowances: these are the additional payments made by the employer to the employees for any specific reason.
- Deductions- deductions mainly comprise of the following-
- Employees Provident Fund (EDF): this is one of the compulsory deductions from your salary. As we know, the Provident Fund is a scheme through which it saves or stores a part of the salary as your savings. At the end of your term in that company, according to other legal terms and contracts, you will get the full amount of the EPF. You may also take loans from the company on the basis of your EPF, which also depends from one company to another. This takes up about 12% of your salary (percentage may vary from one company to another).
- Professional tax: This applies on the basis of every person’s tab of tax files. Professional tax is important for every employee, whether salaried individuals, traders, or professionals. Although it does not take place in every state, it is levied on every individual equally.
- Tax Deductible at Source or TDS: every employer is responsible for deducting a part of the employees’ salary on behalf of the Income Tax Department. The employer pays this tax to the government together with the rest of the tax returns so that every employee does not have to deal with it personally. You can also reduce the amount of money that the company deducts from your salary by enrolling yourself in various tax-saving schemes and proper documentation of the same.
Some of these deductions that reflect on the salary slip may decrease if you, as the employee, claim it. Every company has a certain limit up to which the employee can claim deductions and add it to their earning or income. Careful analysis of the same will help you in understanding these terms without any difficulty.
A salary certificate is a document that helps in acknowledging the payment of salary to the individual employee. An employee may write a letter to the company, asking them to provide him or her for a certificate that is proof of the amount of salary or income he or she gets in the company. Once the company receives this letter, they are bound to provide the employee with a certificate that states the salary he or she gets. It specifies the name of the company or organization under which the employee works. It also mentions the time and date since he or she has been a part of the company or organization.
The company may also choose to write a line or two regarding the employee, which describes either the kind of person he or she is or how well he or she does their job at the company. It must be verified by the company either by the direct employer along with a legal stamp of the company. An employee may ask for this certificate at any time during or after his term of work at the company. This is an important document to have in your hand while applying for loans or to file your income tax returns.
With the introduction of technology and it’s advancements in almost every field around the world, life has only become easier by the minute. Now, for some companies, there is no need to create the salary slip in paper unlike before. With the help of technology, companies can do this via the internet where the salary slip is created on the desktop or laptop and is sent as an e-salary statement to the employee.
Customized software of each company allows the employers to create and submit online databases with the help of details like the salary, bank account, deductions and additions, other personal details, and so on. This information will be available in a downloadable format. Various organizations today are making sure of providing proper training to those individuals who have no working knowledge. This helps to understand better and to adapt to better and progressive ways of keeping up with the new and modern world.
Salary Certificate Format
The basic salary certificate has the following format-
The salary certificate is an important document if you are looking for a new job. It is a document that acts as proof of the amount of salary that the company gives you, and that shows the different divisions and deductions of the salary that you get in hand. You have to write a letter to the employer or company head, and you will get this certificate. Every company may or may not make certain changes in the format of the certificate, adding or removing certain sections, but the basic idea remains the same. This may be used in case of bank transactions, to show as proof of your tax returns, to apply for loans either from the bank or from other agencies, applying for a credit card, etc.
TDS on salary
The law of every land states that the employer is responsible for deducting a certain amount of money from the employee on behalf of the income tax department every month. This amount that is deducted from the employee’s salary is known as TDS, and this is calculated when the income or earning of the employee crosses the exemption limit. Tax Deduction at Source or TDS is a compulsory deduction that must take place before crediting the salary to the employee. There are different rates of TDS depending on whether you are a salaried individual, a professional in any field, or a trader in any field.
In the case of a salaried individual, the employer deducts TDS on the basis of the average rate of income of every employee. The rate depends upon the salary of the employee, and it may vary from one employee to another depending upon his or her position in the company.
Another important factor to remember is the rate of income tax per year. This may either remain constant throughout the year or may change depending upon the condition of each financial year. The rate of income tax is calculated at the beginning of every financial year, i.e. in April every year.
This is done after keeping track of the employee’s salary that will be paid to him throughout that year. The number of tax-savings and investments will also determine the rate of income that is levied on each employee. The rate may or may not change depending upon whether or not the individual provides sufficient proof showing the investments that he or she made throughout the previous financial year.
Since the TDS deductions are made on the basis of net taxable income, it may go through some variations under some specific circumstances. These may be-
- Increment in salary or bonus
- Change of jobs
- Tax-saving investments made by the employee
- Submission of proof of tax-saving investments
The basic salary of an employee is calculated once all of the following details are present-
- Basic salary
- Statutory bonus
- House Rent Allowance
- Dearness Allowance
- Income Tax
- FBP allowance
- Transport allowance
- Provident fund
- Professional fund
There may be more additions to this list depending upon the position of the employee in the company. Although the above list comprises of the basic components that one finds in the salary or income-earning of every employee, we can also find a formula that gives the accurate salary of the employee. The formula goes as follows-
The components of this formula are also subject to change according to the various policies of the company. Some companies may choose to make certain deductions, and some may credit more to the employee. The Indian Labour Law states that in the formal sector, where employers can deduct most (but not full) of the salary while employees in the informal sector are free to take away the entire income quota.
Early salary is one of the best-used schemes today. With its effective methods and techniques, you will get a chance to take instant loans for the month. If you have somehow exhausted your salary and are yet to complete the month, then Early Salary is the number one choice for you. It is safe and allows you to take a short-term loan and finish the rest of the month in peace.
You can pay these loans once you get your next salary or even slowly, depending upon the plan you choose. Falling short of your salary in a month is a very natural problem that anybody and everybody can face. During these times, the presence of a quick and fast loan that will give you cash almost instantly is very important. Early salary will give you an instant loan depending upon the plan you choose that you will have to repay within a short period of time. These are also made considering your convenience as well. Although taking loans are risky, they are last-minute life-savers. Make sure to surf through the options and plans carefully so that you can pay back the amount within the stipulated time!
Salary Slip Format in Excel
Employers can also create a salary slip format in excel. With a few changes here and there, excel sheets are the perfect way to create a ready-made salary slip for the employees. Just type in the details of the salary slip format in the designated cells and your work is done!
Salary as Per section 17 (1)
Section 17(1) of the Indian Law states that the salary of an individual includes the following-
- Basic salary
- Advance fees, commissions, perquisites or profits that the employee receives in addition to the basic salary
- The aggregate of all sums (including deductions)
- Annual accretion to the balance at the credit of the P.F.
- A payment that the employee is entitled to if any leaves were not availed
- Contributory amount yet to be given to the employee under the pension scheme as specified by the Central Government as specified in section 8OCCD
There is an amount of gratuity and EPF that an employee gets or is deducted by the company from an employee’s salary. The income that an individual gets in hand after subtraction of these two components is known as Gross Salary. Thus, the amount of money that an individual receives before the deduction of taxes is known as Gross Salary. It also includes all the advances and bonus payments that he or she receives.
Every company has to follow the rules of the gross salary payment. The gross salary payment does not depend upon the rate of income because it is inclusive of the tax deductions. Once all the tax deductions are competing, we then get what is known at the net salary.
Salary Calculator India
Salary Calculations comprise the following components- Basic Salary, Allowances, Deductions and I.T. declarations.
- Gross Pay is the sum of basic pay + allowances.
- Net pay is the result that you get when you subtract the sum of deductions and total TDS from the gross pay. Total TDS is the summation of surcharge, health and education cess and TDS.
- Basic pay is 50% of Gross Salary
- Provident Fund is the 12% of the basic pay, plus the P.F. of applicable allowances
- Employee State Insurance is 0.75% of the gross pay
Know about your salary slips and find out the what, why and how of everything that you find in your slips today!