📖 6 min read | Salary | April 08, 2026
Last updated: April 08, 2026
Most Indians receive a salary slip every month and never really read it. It is a confusing document filled with abbreviations — EPF, PT, TDS, HRA, LTA, Special Allowance — and unless someone explains each line, it remains a mystery. This guide breaks down every component so you understand exactly where your money goes.
Every salary slip has two sections: Earnings (left side — money added to your pay) and Deductions (right side — money taken out). The difference between total earnings and total deductions is your net pay — the amount credited to your bank.
Basic Salary: This is the fixed, core part of your salary — usually 40-50% of your gross pay. It never changes month to month unless you get a raise. Every other component (HRA, PF, gratuity) is calculated based on your basic. A higher basic means more PF savings but also more tax on the excess.
House Rent Allowance (HRA): Typically 40-50% of basic. If you pay rent and are on the old tax regime, part of this is tax-exempt. If you do not pay rent or are on the new regime, HRA is fully taxable. Use our HRA Calculator to check your exemption.
Special Allowance: This is the "catch-all" component. Whatever is left after basic and HRA is put here. It is fully taxable — no exemptions available. Some companies split this into Conveyance Allowance, Medical Allowance, etc., but the tax treatment is largely the same under the new regime.
Leave Travel Allowance (LTA): If your company provides LTA, you can claim tax exemption on domestic travel expenses twice in a block of 4 years. You need actual travel bills to claim this.
Performance Bonus / Incentive: Variable pay based on your performance or company results. This appears in the months when it is paid — usually quarterly or annually. It is fully taxable.
EPF (Employee Provident Fund): 12% of your basic salary goes to your PF account. This is mandatory if your basic is up to ₹15,000/month, and most companies continue it even for higher salaries. Your employer also puts 12% — but that does not appear on your salary slip as a deduction (it is an additional contribution). Your EPF earns 8.25% interest (FY 2025-26) and can be withdrawn when you change jobs or retire.
Professional Tax (PT): A state-level tax deducted monthly. Maximum ₹2,500 per year. Not all states charge it — Karnataka charges ₹200/month, Maharashtra charges ₹200/month (₹300 in February), and some states like Rajasthan do not charge it at all.
TDS (Tax Deducted at Source): This is your income tax, deducted monthly by your employer. The amount depends on your declared investments (80C, HRA, etc.) and the tax regime you have chosen. If you have not submitted your investment declaration to HR, TDS will be higher — submit it as early as possible in April to ensure correct deductions from month one.
Gross Salary = Total of all earnings (before deductions)
Total Deductions = EPF + Professional Tax + TDS + any other deductions
Net Pay = Gross Salary − Total Deductions = what hits your bank account
Tools: CTC to In-Hand Calculator | HRA Calculator | Gratuity Calculator