How to read your salary slip in India: every component explained

Last updated: June 2026  ·  FY 2026-27

You get a salary slip every month but most of it looks like a mystery — Basic, HRA, Special Allowance, EPF, TDS, Professional Tax. Why is the number at the bottom so much less than your CTC? This guide explains every single line, with a real example for a ₹10 lakh CTC employee.

What is a salary slip?

A salary slip (also called a pay slip or pay stub) is a document your employer gives you every month showing your earnings and deductions. It's proof of income — you'll need it for loans, visa applications, renting a flat, and filing your income tax return (ITR).

Every salary slip has two sides: Earnings (what you're paid) and Deductions (what's taken out). The difference is your Net Salary — what actually lands in your bank.

A real salary slip example

Let's use an employee with a ₹10 lakh annual CTC, 40% basic, in Bangalore (Karnataka — Professional Tax applies).

Now let's go through every line and explain what it means.

Earnings — what you're paid

Basic salary

Basic is the foundation of your salary — usually 40–50% of your CTC. It's fully taxable. Almost every other component is calculated as a percentage of basic — your EPF contribution, HRA, and gratuity all use basic as the base. A higher basic means higher EPF but also higher taxable income.

HRA (House Rent Allowance)

HRA is an allowance your employer pays to help cover rent. It's typically 40–50% of basic (50% for metro cities like Mumbai, Delhi, Bangalore, Chennai). The important thing: HRA is partially or fully tax-exempt if you actually pay rent. If you live in your own home, HRA is fully taxable. Use our HRA exemption calculator to see how much of yours is tax-free.

Special allowance

This is a catch-all component — whatever is left after accounting for Basic, HRA, and other named allowances is dumped here. It's fully taxable and has no special treatment. Many companies use it to make up the difference between the total CTC and other structured components.

LTA (Leave Travel Allowance)

LTA is an allowance for travel within India. You can claim it as tax-exempt twice in a block of four years — but only for actual travel, with proof of tickets. If you don't claim it, it's taxable. Note: LTA exemption is only available under the old tax regime, not the new regime.

Other allowances you might see

Some companies also pay: Medical allowance (up to ₹15,000/yr, old regime only), Children education allowance, Transport allowance, Fuel reimbursement, Phone/internet reimbursement. These are company-specific and their tax treatment varies.

Deductions — what's taken out

Employee PF / EPF (Employee Provident Fund)

EPF is a mandatory retirement savings contribution — 12% of your basic salary is deducted from your pay every month. Your employer also contributes another 12% of basic, but this comes from your CTC, not additionally. The money goes into your EPF account and earns interest (currently 8.25% per year). You get it back when you retire or leave after 5+ years. Under the old regime, employee EPF contribution is tax-deductible under Section 80C. Under the new regime, it's not deductible but the withdrawal remains tax-free.

Professional Tax (PT)

Professional Tax is a small state government tax on employment income, deducted by your employer. The maximum is ₹2,500 per year (₹200–250/month). It applies in Maharashtra, Karnataka, West Bengal, Andhra Pradesh, Telangana, Gujarat, and a few others. Delhi, Haryana, Rajasthan, and several states don't charge it. The amount you pay is deductible from your taxable income under both old and new tax regimes.

TDS (Tax Deducted at Source)

TDS is the income tax your employer deducts every month on your behalf. At the start of the year, your employer estimates your total annual tax liability based on your salary and the regime you chose, then divides it by 12 and deducts that amount each month. If your actual tax at year-end is lower (because you claimed deductions), you get a refund when you file your ITR. If it's higher, you pay the difference.

CTC vs Gross vs Net — what's the difference?

This is why your take-home on a ₹10 lakh CTC is closer to ₹70,000–75,000 per month, not ₹83,333 (which is ₹10L ÷ 12). Use our salary calculator to see your exact take-home.

Why is my take-home different from my friend's on the same CTC?

Several factors cause this:

• Tax regime — new regime vs old regime results in different TDS amounts
• Basic % in CTC — higher basic means higher EPF deduction
• State of posting — professional tax varies by state
• HRA claimed — if you claim HRA exemption, your TDS is lower
• 80C investments declared — declaring PPF, ELSS, life insurance reduces TDS (old regime only)
• Home loan — interest deduction under old regime reduces taxable income

Quick reference: every salary slip component

Frequently asked questions

This guide is for general information only. Tax rules change annually. Consult a chartered accountant for personalised advice. All figures assume FY 2026-27 (AY 2027-28).