What are the Components in a Salary Slip?


A document with an official detailed breakdown of the incomes and deductions issued monthly by an employer for her employees is called a salary slip or a payslip. It consists of your basic information such as your name, the company for whom you are working, your designation, and your employee code. Check here to understand more about the full and final settlement.  The salary components have two categories. 

component of salary slip

Salary Slip Format 


  • Basic Salary

The basic component of a salary is the first component. It constitutes 35-50% of the payslip.  

  • Dearness Allowance

Dearness allowance constitutes around 30-40% of the basic pay. It is paid to keep a balance between the effects of inflation on the employee’s salary based on the employee’s cost of living. 

  • House Rent Allowance

This allowance is given to employees who reside in rented living spaces dependent upon the city of residence. You can save income tax and it is exempted from tax up to a specific limit only, assuming the employee is paying his due rent regularly. 

  • Conveyance Allowance

Conveyance allowance for paid to an employee for the money spent by him on travel to the workplace. The allowance is exempted from tax up to a specific limit. 

  • Medical Allowance

The medical allowance is paid to an employee for any medical expenses if the medical bill is submitted to show proof of these expenses during his term of employment. If no proof is given, the allowance gets taxed. 

  • Leave Travel Allowance

This allowance is for the cost of travel when the employee is on leave, including the employee’s immediate family members. Proof is required for tax exemption under a certain limit for two travel leaves in 4 years. 

  • Special Allowance Salary

This taxable allowance is paid for a sense of encouragement to the employees differing on the performance of the employee. It varies from company to company. 


  • Professional Tax

This tax is levied on all the people who earn a living through a medium by the state government in 16 states. 

  • Tax Deducted at Source

Based on the gross tax slab of the employee, a certain amount is deducted on behalf of the income tax department from the salary slip. 

  • Employee Provident Fund

According to 80C of the Income Tax Act, a 12% deduction is considered a contribution to the provident fund on the employee’s behalf. 

Why is a Salary Slip Important? 

  • To optimize deductions and tax liability.
  • To show legal proof of employment for background checks when applying for a loan/new credit card or travel visa. 
  • To negotiate with new prospective employers and the pay scale. 


The CTC is the variable pay spent by the employer on all services for the employee. Gross salary is the amount committed by the employer to the employee every month. The full and final settlement does not PF and gratuity.

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