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This is Abhilash, formally khandesh Abhilash
I devour my self largely in investment activities. And find me during all odd hours sharing some thing about the investment ideas


Comprehending your salary slip or payslip

Your salary slip is not as plain and boring as it looks. It has vital information that can help you plan your taxes, negotiate a hike, and do much more. A salary slip is an important document that serves as proof of your employment and income.

This article covers:

What is salary slip?

Is the issuance of salary slip mandatory?

CTC meaning 

What is gross salary?

What is net salary?

Components of your salary slip 

Significance of a salary slip 

Salary slip format

How to check salary slip online?

What is salary slip?

Also called as a payslip, a salary slip is a document issued by an employer to their employees every month. It indicates the detailed salary breakdown, deductions, and tax cut at source.

Is the issuance of salary slip mandatory?

Yes, the issuance of a payslip is mandatory by law. Typically, an employer furnishes a salary slip on the day of crediting your salary or a few days later. In case your employer fails to furnish your salary slip monthly, you have the right to demand the same. Your employer may either give your salary slip in paper or digital form.

CTC meaning

Your salary is expressed as an annual figure termed as the cost to the company. This is the total amount that an employer spends on an employee in turn for the latter’s services. Now that you know what is CTC, let’s look at its components, which include:

What is gross salary?

It is the monthly salary/amount before making any deductions. Gross salary excludes EPF and gratuity.

Gross Salary = Basic pay + HRA + Other allowances

What is net salary?

Net salary is what you receive after deductions.

Net Salary = Basic Salary + HRA + Allowances – EPF – Professional tax – TDS

Components of your salary slip

There are 4 broad constituents of your salary slip:

Income, allowances, and prerequisites

Deductions and tax

Let us look into these 3 in detail.

1. Income, allowances, and perquisites

Your monthly salary income includes the following. Note that not all employers offer all these.

Basic pay

Basic pay constitutes 35% to 50% of your monthly salary and is the basis to calculate other components of your salary. Basic pay is usually higher at junior levels—when you are early in your career. However, other allowances tend to get higher for tenured employees. All in all, higher the basic pay, higher your allowances and taxes would be. Basic pay is fully taxable.

Dearness allowance (DA)

Dearness allowance is offered to make up for the impact of inflation on your salary. It is generally 30% to 40% of the basic pay and is ascertained based on the cost of living in a city. Offering DA is at the employer’s discretion. The amount is fully taxable.

House rent allowance (HRA)

This component is offered to employees that stay in a rented place. HRA depends on the city of residence: 50% of the basic pay for metro cities and 40% for other cities. HRA is exempt up to a certain limit if you pay rent. The exemption is the lower of:

Annual rent paid minus 10% of basic salary plus dearness allowance, OR

Actual HRA received

The exemption is also applicable when you own a house but you are employed in a different city.

Conveyance allowance

It is the amount that your employer pays you to travel to and from work. Conveyance allowance is exempt from tax up to a specific limit.

Medical allowance

It is the amount your employer pays to meet medical expenses when you are in employment. In order to claim medical allowance as a deduction, you are required to furnish medical bills as proof. Only then you can claim a maximum exemption of up to Rs 15,000.

Leave travel allowance

This component of the salary covers the travel expenses of an employee and their immediate family members when the former is on leave. LTA is exempted up to a certain limit but only on the submission of proof of the journey. The exemption on LTA is only applicable for 2 journeys in a block of 4 calendar years.

Special allowance

A special allowance is offered to encourage employees to perform better. It includes performance-based allowances and free meal pass and is fully taxable.

2. Deductions and tax

Your monthly salary income is subject to the following deductions:

Employee Provident Fund (EPF)

This scheme is primarily offered to help employees of the organised sector save for retirement. Both you and your employer contribute 10% to 12% of your basic pay and DA as towards your EPF.

Professional tax

This is a tax levied by the state government on individuals carrying out a profession. Only a few states including Karnataka, Maharashtra, Andhra Pradesh, West Bengal, Tamilnadu, Telangana, Gujarat, Assam, and Kerala levy professional tax.


Your employer deducts a portion of your monthly salary as gratuity, which is payable when you complete 5 yrs in the company.

Variable component

In addition to the fixed component of salary, you may also be entitled to receive a variable component of salary. This may be an incentive or bonus linked to your performance. It is entirely taxable.

Tax deducted at source (TDS)

TDS is the tax deducted on your salary income. It is deducted by your employer who then submits the same with the income tax department. The rate of TDS is ascertained based on the gross tax slab of an employee.

Significance of a salary slip

A salary slip is legal proof of your employment and income. This makes it an important document to be submitted when applying for a loan, a credit card or enhancing the credit limit as it suggests your repayment ability

A salary slip is also an important document for background checks, application of travel visa, and higher education overseas

A payslip gives insights into your monthly remuneration and its components. These details come in handy when planning for your taxes and filing income tax returns

New employers seek one to a few months’ salary slip as proof of last drawn salary. Based on this, you can negotiate a hike while switching jobs

A payslip aids in ascertaining your tax outflow for the year in question and also calculate TDS returns and income tax refund

Free and subsidy-based government schemes require you to submit salary slips

Salary slip format

There is no standard salary slip format. Each organisation can furnish salary slips in different formats. A typical salary slip, however, mentions information other than income and deductions including:

Name of the employee

Employee number or code


Bank account number

UAN (for EPF)

Total working days in a month

Loss of pay

How to check salary slip online?

If your employer has an HR portal, you can head over there and view your payslip there. Alternatively, you can also download the salary slip in PDF format.

By now, you may have understood why it’s important to understand how to read a salary slip and its components. On receiving your salary slip, ensure that you check the components of your payslip with your employment agreement. Verify your income, perks, deductions, and TDS.

To make the most of your salary consider investing a portion in tax-savings avenues. This way, not only can you claim tax deductions/exemptions but also earn returns thereon.

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My Top Picks

Penny stocks: meaning and things to note before pinching some

When it comes to investing in the stock market, you would generally want to place your bets on well-established largecap and midcap stocks because they are relatively stable and less risky. While that’s true in most cases, penny stocks can also make good investments. An apt description for these shares is “Chhota packet bada dhamaka” as they are volatile.

Let’s look at what penny stocks are, their features, and when you should invest in them.

What are penny stocks?

Shares with current market price ranging from Rs 0.05 to Rs 10 are tagged as penny stocks in India. Such stocks also have low market capitalisation—typically less than Rs 500 cr. That’s why penny stocks are traded infrequently, which make them highly volatile and illiquid investments.

Salient features of penny stocks

Penny stocks have more to them than just low prices and market cap. Below are some of the salient features of penny stocks to give you a better understanding of these avenues and whether they are fit for your investment portfolio.

Penny stocks are good bets for beginners

Penny stocks are priced low making them attractive avenues for beginners in stock investing. With no experience and thorough knowledge in the stock market, a new investor would find investing in penny stocks affordable and easy to experiment.

Some penny stocks yield high returns

Penny stocks are generally issued by smallcap companies, small businesses, and startups. Such businesses are young and fairly new in the industry and stock markets, which give them a huge potential to grow. If penny stocks unleash their growth potential, they can become profitable over time and generate handsome returns

Penny stocks can be risky

As is known, along with high returns come high risk. Since penny stocks are mostly issued by smallcap companies and startups, they can be risky avenues. This is because, although smallcap stocks have the potential to grow, they have fewer financial resources and smaller balance sheets. A key takeaway here is that you may have to hold penny stocks for a long time to optimise your returns (minimise risk and maximise returns).

Penny stocks with strong fundamentals can be good investments

Although smallcap companies are risky businesses, those with strong fundamentals, management, financials, and prospects can become profitable over time. So, when scouring for penny stocks in India, don’t just look at the financial statements at their face value, try to guage their quality as well.

Penny stocks are generally illiquid

High volatility and low market capitalisation of penny stocks attract less investors. Further, since these are traded less frequently, penny stocks are illiquid. Meaning, matching buyers of penny stocks when you need to liquidate your holdings may be challenging. Ergo, you may refrain from investing your emergency funds in penny stocks.

Penny stocks have limited information

Since penny stocks are mostly issued by smallcap companies and startups, you may not get enough information about the business—stability, historic data, prospects—to make sound investment decisions. Ergo, you should only invest in penny stocks if you can access vital information about the company.

Prices of penny stocks can be manipulated

Given that penny stocks as traded in low volume, there is a risk of brokers and promoters manipulating their prices. As with any other share, penny stocks also have upper and lower circuits. Ergo, if a stock is locked in the upper or the lower circuit for a long time, without corresponding news, then chances are that the stock price is being manipulated. That’s why it is best to confirm the driver of extreme trends in the price of a penny stock before transacting it.

Who can invest in penny stocks?

There are no special requirements for investing in penny stocks. You can buy or sell them on a stock exchange—if they are listed—like you do with any other stock. Nonetheless, you can look if you fit in one of the following categories of investors looking to bat on penny stocks:

You are a beginner and want to experiment stock investing

You have a low capital budget

You are willing to assume high risk

You are willing to stay invested for a long-term

You are looking to invest in multibagger penny stocks—those that generate returns higher than the investment amount

Asking meaningful questions like these also help in making better investment decisions:

Are the company’s statements audited well?

Does the company disclose required information to market regulator and investors on time?

Do the management’s words or plans match their actions and results?