Whether it’s your first payslip or if you’ve been working for years, it’s still important to know how your pay is worked out. Your payslip contains important information, including your payroll number, your gross and net pay, and normally your tax code. It’s important to understand your payslip and how to make sure you’re being paid the right amount.
All employees and workers are entitled to an individual, detailed written payslip – when, or before, they’re paid.
Your written payslip doesn’t have to be on paper – it can be sent to you by email or accessed through a website.
The right to a payslip applies to casual staff as well as employees. It doesn’t apply to independent contractors or people working freelance.
Importance of Salary Slip
- The salary slips act as evidence of employment.
- It proves that the organization has permanently recruited an employee.
- This is handy in negotiating with new employers for better pay.
- Salary slips aid to apply for loans in banks.
- It is an authentic proof of income and is used to file income tax returns.
- It serves as proof for PF and insurance deductions.
All employees must receive payslips on a monthly basis as it is the proof of their employment in an organization and is required for various compliance filings like income tax filing and PF return filing. If an employee has not received it, he/she could speak with their payroll team to have it sent automatically post payroll processing.
What are E-Payslips?
In the current technologically advanced times, most employers prefer to make the payslips available online. This digital, online payslip is known as an e-payslip. You can easily view and download the salary slip by logging into your organization’s salary portal.
Components of a Salary Slip
The components are sub-divided into 2 sides which are as follows.
- Income or earnings (LHS of your salary slip)
- Deductions (RHS of your salary slip)
We look into the various components of a salary slip in the paragraphs below:
All the income and gains such as your basic salary, allowances, reimbursements, etc are allocated on the left-hand side of the payslip.
All deductions such as EPF, Professional Tax, TDS, etc are located on the right side of the payslip.
What is a Salary Slip used for?
If you study the payslip format, you will find that there are many components listed on it. Downloading and understanding each of these components can prove to be very helpful. Listed below are some of the uses of a salary slip.
Maximize Income Tax Savings
Thorough knowledge of the basic pay, house rent allowance, tax deductions, etc., can help you with your income tax planning so that you can maximize savings. For example, under Section 10 of the Income Tax Act, 1961, if you live in rented accommodation, you can claim a part of the House Rent Allowance (HRA) under tax deduction. Also, under Section 80C of the same Act, you can enjoy tax savings against EPF (Employees’ Provident Fund) contribution, which makes up to 12 percent of your basic salary.
To Apply for a Credit Card
You need the monthly salary payment slip even when you apply for a credit card. The document serves as proof of your regularised income and backs your eligibility for the selected credit card.
Prove Employment Status
Your payslip is legal proof of your employment status. If you are looking to get a loan, open a bank account, apply for a visa, etc., you would need to submit copies of your salary slips for the last three months as proof of your last drawn salary.
Resolve Discrepancies in Salary Payment
If you see a change (increase/ decrease) in your monthly salary amount, you can refer to your payslip and check the deductions. In case of discrepancies, you can use the payslip as proof and raise the issue with the finance team of your organization.
For Switching Jobs
When you are looking to seek employment in a different organization, you would need to provide your salary slip to the employer to initiate salary negotiations. This is because your new salary is decided based on your current salary.
Wealth Cafe Learning:
A payslip or salary slip to an employee is the amount of money paid by the employer to you for the month. It contains all of the details mentioning how the salary was calculated and sent to you. We hope you've understood everything about salary slips.
If you have any queries on your salary slip, do ask in the comments section below.