A Multi Topics Tech Blog that Make us Tech Geek

Everything You Need to Know About Your Salary Slip

Salary

Salary

Every month, your finance department will send you a salary slip once the salary gets paid out.
For most people, the importance of salary slip is only when they
apply for a loan or a new credit card. Otherwise, the confusing terms
and figures seem like a puzzle you don’t want to solve.

But here’s why you might want to understand your salary slip better.

    • Choose smartly from competing offers when you are looking to switch jobs
    • Optimize tax liability by making full use of the deductions available
    • Understand what percentage of your salary is forced savings (EPF, ESI etc.)

The income part of your salary slip

#1: Basic Salary

It’s the most important component of your salary and generally
comprises 35-50 % of your total salary. Most of the other components are
structured around it. Bigger the basic salary, the more tax you need to
pay.

Tax Implications: 100% taxable

Adds to in-hand? Yes

 

# 2. House Rent Allowance:

It’s an allowance to pay your house rent. Normally, HRA is 40-50 % of the basic, based on your location (metro or non-metro).

Tax Implications: You get tax exemption based on whichever of the following is lower

  • 40% of your basic pay
  • Actual rent minus 10 % of basic
  • HRA component specified on your salary slip

Adds to in-hand? Generally Yes

 

# 3. Conveyance Allowance:

It’s paid by the company to take care of your official commuting
needs. The amount varies depending on your job profile. For example,
sales executives who have to travel frequently get significantly higher
conveyance allowance.

TRENDING POST :  Comparison Between Impact Printer and Non-Impact Printer

Tax Implications: Rs 1600 per month or the conveyance allowance component in your salary slip, whichever is lower, is exempted from tax.

Adds to in-hand? Yes, depending on how much you actually spend.

 

# 4. Leave Travel Allowance:

It’s given by employers to cover the cost of employee travel while on
leave. It includes travel expenses of your immediate family members as
well.

Tax Implications: Proof of journey required to avail deduction
subject to certain limits. Any expenses incurred during the trip apart
from travel does not count towards your LTA tax exemption. The exemption
is also applicable only for 2 journeys undertaken in a block of 4
calendar years.

Adds to in-hand? No.

 

# 5. Medical Allowance:

It is given by employers to cover any medical expenses incurred during the period of employment. It is also generally a reimbursed expense and thus subject to providing proof of expense.

Tax Implications: The allowance is exempt up to 15,000 per annum subject to proof of expenses such as medical bills.

Adds to in-hand? Yes. If you fail to provide the proof, you still receive the amount, but will be fully taxed.

 

# 6.  Performance Bonus and Special Allowance:

It is given to reward or encourage employee performance and varies with performance or company guidelines.

Tax Implication: 100% Taxable

Adds to in-hand? Yes. It can be variable and therefore, difficult to assess as part of your in-hand.

Other Allowances: There are quite a few other kinds of
allowances based on the industry or the company. Most such allowances
are fully taxable. They might or might not add to your in-hand salary
based on the conditions they are subject to.

TRENDING POST :  How to Restore Deleted Photos & Videos From a Digital Camera

Make sure you talk to the HR and get a clear understanding of the in-hand and tax implications of your salary components.

The deduction part of your salary slip

# 1. Provident Fund:

PF is typically 12% of your basic salary which is put into a
government controlled body, Employees’ Provident Fund Organisation. Your
contribution is typically matched by the company subject to certain
maximum amount, defined as per the company policy.  You can also choose to opt out from the PF scheme.

How to lower this deduction? You can choose to opt out of the PF scheme. In case you opt out, make sure you invest it regularly in better investment
options like equity mutual funds that gives you a higher return. If you
are unsure of investing the money, it’s best to stay invested in PF.

 

# 2. Professional Tax:

This is payable only in the following states-Karnataka, West Bengal,
Andhra Pradesh, Telangana, Maharashtra, Tamilnadu, Gujarat, Assam,
Chhattisgarh, Kerala, Meghalaya, Orissa, Tripura, Jharkhand, Bihar, and
Madhya Pradesh. It normally amounts to just a few hundred rupees each
month and is subject to your gross tax slab.

How to lower this deduction? This deduction cannot be lowered.

 

# 3. Tax deductible at source:

This amount, which is decided based on your overall tax slab, is
deducted on behalf of the income-tax department by your employer.

How to lower this deduction? You can reduce this burden by investing in tax savings instruments under Section 80 C or other sections under the IT act.

 

Things to keep in mind when comparing salary slips in offers:

TRENDING POST :  Types and Difference Between Fetch and Render in Google WebMaster?

# 1. Your basic salary is critical as most of your allowances will be
based on that figure. This is your real salary or primary hiring cost.

# 2. Look for special allowances and check whether they are performance or event based.

#3. Do not focus only on the in-hand salary. Look at the other
benefits the company provides (health insurance, accident insurance,
free food, bus transport, better career growth) which might outmatch a
higher in-hand salary offer from some other company

This article was first seen on Scripbox

Gurjit Singh is Microsoft Certified IT Professional. He likes to write about Computer Network, WordPress, Blogging Tips, SEO, Make Money Online, Computer Tips and Creating Tech Tutorials.
Thanks For Visiting YouMeGeeK.CoM
Share this:
Page 1 of 11

Leave a Reply

*

Alexa Certified Traffic Ranking for YouMeGeek.com

  • 296
  • 989

Tech Blogging Ideas!

Receive top education news, Blogging lesson WordPress, ideas Make Money Online Tips
and more!
JOIN NOW
close-link