Salary / 6 min read
How to Read Your Salary Slip: Every Component Explained
Understand every line on your payslip — basic, HRA, allowances, PF, professional tax and TDS — and how gross salary becomes your monthly in-hand pay.
By Analyze Daily Team · Published 23 June 2026 · Updated 15 July 2026
Key takeaways
- A salary slip has two halves: earnings (what you are paid) and deductions (what is taken out).
- Gross salary is the total of all earnings; net or in-hand salary is what remains after deductions.
- Basic pay drives your PF, gratuity and several tax exemptions.
- The biggest deductions are usually EPF, professional tax and income tax (TDS).
Earnings: what you are paid
The top half of your payslip lists your earnings — the components that add up to your gross salary. Basic pay is the core, and most other figures are built around it.
- Basic salary — the foundation; PF, gratuity and HRA limits are all based on it.
- HRA (House Rent Allowance) — partly tax-exempt if you pay rent, under the old regime.
- Dearness Allowance (DA) — a cost-of-living component, common in government and PSU pay.
- Special allowance — a balancing, fully taxable component.
- Other allowances — conveyance, LTA, and reimbursements may also appear.
Deductions: what is taken out
The lower half lists deductions — amounts subtracted from your gross to arrive at your take-home pay.
- Employee PF — 12% of your PF wage base, going to your provident fund.
- Professional tax — a small state levy, capped at ₹2,500 a year.
- TDS (income tax) — tax deducted at source based on your estimated annual liability.
- Other deductions — insurance premiums or recoveries, where applicable.
Gross vs net vs CTC
Three numbers often get confused. CTC is the total annual cost to your employer, including their PF contribution and benefits you never see as cash. Gross salary is the sum of your earnings before deductions. Net (in-hand) salary is what actually lands in your account.
This is why your monthly bank credit is usually lower than CTC divided by twelve; the exact gap depends on the offer structure and deductions.
Budget around your net salary, not your CTC — the in-hand figure is the money that actually pays your rent, EMIs and SIPs.
Why basic pay matters so much
Basic pay is more than just one line. Your PF contribution, gratuity, and the HRA exemption are all calculated from it.
A higher basic increases your forced savings and old-regime exemptions but slightly lowers monthly cash; a lower basic does the opposite. Knowing this helps you read an offer letter properly.
Sources and review
How this guide was prepared
Material rules and regulated assumptions are checked against primary or first-party references. The page was last reviewed on 15 July 2026. If a rule or figure has changed, please report it through our corrections process.
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