Every month, money lands in your account – and every month, it is less than the impressive figure in your offer letter. The salary slip explains the gap, but few employees read it closely. CTC (cost to company), gross salary, net pay: three different numbers, each with its own logic, connected by a chain of deductions – provident fund, professional tax, gratuity provisions, TDS – that are partly your money, partly taxes, and partly accounting. Learning to read your slip is the first step to verifying you are paid correctly and planning your taxes. Here is a line-by-line guide.

CTC vs gross vs in-hand: the three numbers

CTC is what you cost the company, not what you earn. It includes your gross salary plus the employer’s contributions – employer PF (12 per cent of basic), gratuity provision (about 4.81 per cent of basic), and sometimes insurance premiums and other benefits. Gross salary is your total earnings before deductions: basic plus allowances. Net or in-hand pay is what remains after all deductions – employee PF, professional tax, TDS – and is what actually reaches your bank. A CTC of 12 lakh can easily mean an in-hand of 75,000 to 80,000 a month. The gap surprises every fresher; understanding it prevents the disappointment from becoming a dispute.

Earnings: basic, HRA and allowances

Basic salary is the foundation – typically 40 to 50 per cent of CTC – on which PF, gratuity and many allowances are calculated. A higher basic means higher retirement contributions but also higher immediate deductions. House Rent Allowance (HRA), often 40 to 50 per cent of basic, is partly tax-exempt if you live in rented accommodation and can show rent receipts. The rest of the earnings are allowances: dearness allowance (common in government and PSUs), conveyance, medical, leave travel allowance (LTA), special allowance (the catch-all balancing figure), and performance-linked variable pay. Each allowance has its own tax treatment – LTA exempts actual travel costs twice in four years, for instance – which is why the new-versus-old tax regime choice changes the value of your entire salary structure.

Deductions: where the money goes

• Employee PF: 12 per cent of basic deducted monthly into your EPF account, matched by the employer – forced retirement saving, not a tax.
• Professional tax: a state levy, typically 200 rupees a month in states like Maharashtra and Karnataka, capped at 2,500 a year.
• TDS: income tax deducted at source based on your declared investments and regime choice – an advance payment of your annual tax, adjustable by submitting proofs.
• ESI: for employees earning up to 21,000 rupees a month, 0.75 per cent goes to Employees’ State Insurance for medical benefits.
• Labour welfare fund and other minor statutory deductions in some states.

Note what is not deducted monthly but sits inside CTC: the employer’s PF contribution and gratuity provision. They are real money – the gratuity accrues toward the lump sum you receive after five years – but you cannot spend them now.

How to verify your slip

Check these each month or quarter: basic multiplied by 12 matches the offer letter’s annual figure; PF deduction equals 12 per cent of basic; HRA matches the stated percentage; TDS for the year to date is on track with your expected total tax liability (use the income tax portal’s calculator); and variable pay, bonuses and arrears appear when due. Mismatches are usually payroll errors or unsubmitted investment proofs – fixable, but only if you notice. Keep every slip: they are proof of income for loans, visas and tax scrutiny, and the Form 16 you receive each year summarises them for filing your return.

FAQs

Why is my in-hand pay different from colleagues with the same CTC?

Tax regime choice, HRA claims, 80C declarations and variable pay components all change deductions. Two identical CTCs can yield different take-home pay.

Is employer PF part of my salary?

It is part of your CTC and goes into your EPF account in your name – it is your money, just locked until withdrawal conditions are met.

What if my employer deducts PF but does not deposit it?

Check your EPF passbook on the EPFO portal. Non-deposit after deduction is a serious offence – raise it with HR first, then the EPFO grievance portal.

Compiled by the Khabar 24h Editorial Desk from publicly available sources.