How to Read a Payslip: Every Line Explained

Most employees glance at the net figure at the bottom of the payslip and ignore the rest. That works until it does not — a wrong PF deduction, a missing allowance or a tax declaration that never reached payroll. Reading the four sections takes two minutes and catches most errors.

1. Earnings

These are the amounts before any deduction:

• Basic pay — usually 40–50% of CTC. Everything else is calculated from it, which is why it matters so much.
• HRA — house rent allowance, typically 50% of basic. Partly exempt under the old regime if you pay rent.
• Special allowance — the balancing component. Fully taxable, no separate benefit.
• Conveyance, medical, telephone, meal — allowances, some with limited exemptions or reimbursement rules.
• Variable pay or bonus — usually paid periodically rather than monthly.

Adding these gives your gross salary. Our salary calculator builds the same structure from a CTC figure.

2. Employer contributions

These appear on the payslip but are not paid to you as cash:

• Employer PF — 12% of basic, of which part goes to the pension scheme.
• Gratuity provision — an accrual, paid only after five years of service.
• Insurance premiums — group health cover, often shown as part of the package.

This is the section most people miss when comparing offers. Two jobs with the same CTC can have very different monthly take-home depending on how much sits here.

3. Deductions

These come out of your gross salary:

• Employee PF — 12% of basic. It is your money, in a retirement account.
• Professional tax — a state-level tax, typically ₹200 a month in many states.
• TDS or income tax — deducted monthly based on your declared regime and investments.
• Other deductions — canteen, insurance top-ups, loan repayments, voluntary PF, or recovery of an advance.

4. Net pay

Gross salary minus deductions. This is the amount that reaches your bank account, and it is usually 15–25% below CTC ÷ 12. If the figure has changed without an obvious reason, check the four items above in order — a change in TDS is the most common cause.

Five things worth checking every month

• Basic pay is what you agreed. Errors here quietly affect PF, HRA and gratuity.
• PF is 12% of basic, plus any voluntary contribution you opted for.
• Your tax declaration has been applied. If you submitted investment proofs or chose a regime and TDS looks wrong, payroll may not have received it.
• Allowances appear in full. Reimbursements often need bills to be submitted; missing bills mean missing money.
• Reimbursement claims are settled in the month you expected.

Checking the annual figure

Part B of your Form 16, issued after the year ends, reconciles everything: total salary, exemptions, deductions and tax deducted. Compare it against your twelve payslips before filing your return. If TDS was deducted and deposited, it should appear against your PAN in Form 26AS.

Two numbers in that comparison matter most. The first is whether your declared deductions were actually applied — an HRA claim that never reached payroll means you paid too much tax through the year. The second is whether the regime used matches the one you intend to file under. Our HRA exemption calculator and income tax calculator let you verify both.

Why this is worth the two minutes

A payslip error is not usually dramatic. A missed allowance, a wrong PF percentage, a tax declaration that never landed — each costs a small amount, and all of them are easy to fix in the month they happen and painful to untangle a year later. Read the four sections, check the five items, and keep the slips together until your Form 16 arrives.