Complete Breakdown
Payslip Components in India
Every Earning & Deduction Explained
Understand exactly what every line on your Indian salary slip means — how each component is calculated, its tax treatment, and what it means for your take-home pay.
All Components at a Glance
| Component | Type | Rate | Tax Treatment |
|---|---|---|---|
| Basic Salary | Earning | 40–50% of CTC | Fully taxable |
| HRA | Earning | 40–50% of Basic | Partly exempt (rent proof needed) |
| Medical Allowance | Earning | ₹1,250/month | Taxable |
| Conveyance Allowance | Earning | ₹1,600/month | Exempt up to ₹1,600/month |
| Special Allowance | Earning | Balance of CTC | Fully taxable |
| PF (Employee) | Deduction | 12% of Basic (max ₹1,800) | Exempt under 80C |
| ESIC | Deduction | 0.75% of Gross (if ≤₹21K) | No direct exemption |
| Professional Tax | Deduction | State slab (~₹200/mo) | Deductible under Sec 16 |
| TDS | Deduction | Per income tax slab | Final tax — not deductible again |
💰 Earnings Components
Basic Salary
The core fixed component of your salary. Forms the base for calculating HRA, PF, and Gratuity. Higher basic means more PF savings but slightly lower take-home pay due to higher deductions.
⚠️ Higher Basic = Higher PF deduction but better retirement savings.
Monthly CTC × 0.50House Rent Allowance (HRA)
Provided to cover accommodation costs. Metro city employees get 50% of Basic as HRA; non-metro get 40%. Partially tax-exempt if the employee pays rent — must submit rent receipts to HR.
💡 Submit rent receipts to HR every year to claim HRA tax exemption.
Basic × 0.50Medical Allowance
A fixed monthly component for medical expenses. Under the new tax regime, this is fully taxable. Under the old regime, medical reimbursement up to ₹15,000/year was exempt — but this was replaced by a ₹50,000 standard deduction.
Fixed amountConveyance Allowance
Covers commuting expenses to and from work. Up to ₹1,600/month (₹19,200/year) is tax-exempt for employees not claiming LTA. This is a standard component in most Indian CTC structures.
Fixed amountSpecial Allowance
A residual component that absorbs whatever remains after all other salary components are defined. It is fully taxable with no exemption. Most companies use it to fill the CTC gap. The higher your Special Allowance, the higher your in-hand salary but also your income tax liability.
💡 Larger Special Allowance = higher take-home but higher taxable income.
Monthly CTC − All other components➖ Deductions Components
Provident Fund (PF)
Both employee and employer contribute 12% of Basic salary. Employee contribution goes to EPF (Employee Provident Fund); employer contribution splits between EPF (3.67%) and EPS (8.33%). PF grows tax-free and is withdrawable on retirement or resignation after 5 years.
✅ Employee PF is eligible for deduction under Section 80C (up to ₹1.5 lakh/year).
ESIC
Employee State Insurance Corporation. Provides employees with medical, maternity, and disability benefits. Employee pays 0.75% of Gross; employer pays 3.25%. Applies only if Gross salary is ₹21,000 or below per month. Employees above this threshold are not covered.
⚠️ If your gross exceeds ₹21,000, ESIC stops automatically — no action needed.
Professional Tax (PT)
A tax levied by state governments on employed individuals. Not all states charge it. Maharashtra, Karnataka, West Bengal, Tamil Nadu are major states that do. PT is deductible under Section 16 of Income Tax Act, reducing your taxable income by the PT amount paid.
💡 PT is NOT applicable in Delhi, Rajasthan, UP, Haryana, and several other states.
TDS (Income Tax)
Tax Deducted at Source on salary income. Employer calculates estimated annual tax liability at year start, divides by 12, and deducts monthly. Employees should submit investment proof (80C, HRA, LTA) to employer to reduce TDS. Shown separately in Form 16 at year end.
📋 Submit your investment declaration to HR by February to avoid excess TDS.
See all components calculated for your CTC
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Frequently Asked Questions
What are the main components of a payslip in India?▼
Earnings: Basic Salary (40-50% of CTC), HRA (40-50% of Basic), Medical Allowance (₹1,250/month), Conveyance Allowance (₹1,600/month), Special Allowance (balance). Deductions: Employee PF (12% of Basic, max ₹1,800), ESIC (0.75% of Gross if ≤₹21,000), Professional Tax (state-wise, usually ₹200/month).
What is Special Allowance in salary slip?▼
Special Allowance is a flexible fully taxable component that fills the gap between total CTC and all other fixed components. Formula: Special Allowance = Monthly CTC − Basic − HRA − Medical − Conveyance − Employer PF provision − Gratuity provision. It is the most variable component across companies.
Is HRA fully tax exempt in India?▼
No. HRA exemption is the minimum of: (1) Actual HRA received, (2) 50% of Basic for metro / 40% for non-metro, (3) Actual rent paid minus 10% of Basic. The remaining HRA is taxable. Submit rent receipts to HR to claim maximum exemption.
What is the difference between gross salary and CTC?▼
Gross salary is the total monthly earnings before deductions (Basic + HRA + all allowances). CTC includes gross salary PLUS employer contributions to PF (12% of Basic) and ESIC (3.25%) and gratuity provision (4.81% of Basic). CTC is always higher than gross salary by the employer-side contributions.