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Salary & EPF

Joining Bonus Tax Repayment India
Payroll compliance guide

Expert brief on Joining Bonus Tax Repayment India for businesses, promoters, and individuals. Reconcile with latest notifications before filing.

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Last fact-checked: 2026-06-25
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Salary structure

Understanding Monthly Salary Slip Components

Official fact-check status: Last fact-checked against the Code on Wages and Income Tax rules.

A salary slip is a monthly statement issued by an employer detailing the employee's earnings, deductions, and tax withholdings. Understanding its structure is essential for tax planning and ITR filing.

Key Salary Earnings & Taxability

  • Basic Salary: The core component of your compensation, which is 100% taxable. It forms the basis for EPF contributions and gratuity calculations.
  • House Rent Allowance (HRA): Provided to meet rental expenses. HRA is exempt from tax under Section 10(13A) under the Old Regime, subject to specified limits and rent receipts.
  • Allowances: Includes Special Allowance (fully taxable), LTA (exempt for travel ticket costs u/s 10(5) in the Old Regime), and food coupons.
Deductions

Monthly Statutory and Tax Deductions

Deductions on your salary slip fall into statutory compliance and tax categories:

  • Employee Provident Fund (EPF): Standard deduction of 12% of basic salary + DA, matched by the employer. It qualifies for Section 80C deduction under the Old Regime.
  • Professional Tax (PT): A state-level tax on employment, capped at ₹2,500 per annum, deductible under Section 16(iii).
  • Tax Deducted at Source (TDS): Monthly tax withheld by the employer based on your projected annual taxable income and declared regime.
Questions People Ask

Frequently Asked Questions

1. What are the key components of a salary slip in India?

A salary slip contains earnings (Basic Salary, HRA, Dearness Allowance, Special Allowance, LTA, Bonus) and deductions (EPF, Professional Tax, ESI, TDS). Reconciling these monthly components is essential for accurate ITR filing.

2. How is House Rent Allowance (HRA) exemption calculated?

Under Section 10(13A), HRA exemption is the minimum of: (1) Actual HRA received, (2) Rent paid minus 10% of (Basic + DA), or (3) 50% of (Basic + DA) for metro cities (Delhi, Mumbai, Kolkata, Chennai) or 40% for non-metros. Note: This exemption is only available under the Old Tax Regime.

3. Is HRA exemption available under the New Tax Regime?

No. Under the default New Tax Regime, all major deductions and exemptions—including HRA, LTA, and Section 80C deductions—are abolished. Salaried employees can only claim the standard deduction (₹75,000) and NPS employer contribution u/s 80CCD(2).

4. What is the standard deduction for salaried employees for FY 2025-26?

For FY 2025-26, the standard deduction is ₹75,000 under the default New Tax Regime, and ₹50,000 under the Old Tax Regime. This deduction is automatically subtracted from your gross salary income in your ITR.

5. How does EPF contribution affect my salary slip and taxes?

The employee contributes 12% of basic salary + DA to the EPF, which is deductible under Section 80C (Old Regime only). The employer matches this 12% contribution (split between EPF and EPS). Under Section 80CCD(2), the employer's share is exempt up to ₹7.5 lakh aggregate (including NPS/superannuation).

6. At what point does EPF interest become taxable?

If an employee's contribution to the EPF exceeds ₹2.5 lakh in a financial year (or ₹5 lakh if there is no employer contribution, such as GPF), the interest earned on the excess contribution is taxable as 'Income from Other Sources' under Section 10(11)/(12).

7. What is Professional Tax (PT) and how is it deducted?

Professional Tax is a state-level tax levied on salaried employees, capped at a maximum of ₹2,500 per annum. It is deducted from your gross salary monthly and is fully deductible under Section 16(iii) under the Old Tax Regime.

8. What is a perquisite under Section 17(2)?

Perquisites are non-cash benefits provided by an employer to an employee, such as rent-free accommodation, corporate cars, club memberships, or concessional loans. The valuation of perquisites is added to your taxable salary, and the employer deducts TDS on it.

9. How is gratuity calculated and is it tax-free?

Gratuity is paid after 5 years of continuous service. It is calculated as `(15 * Last Drawn Basic Salary * Years of Service) / 26` for employees covered under the Payment of Gratuity Act. It is tax-free up to a lifetime limit of ₹20 lakh.

10. What is Form 12BB and why is it important?

Form 12BB is a mandatory declaration form submitted by employees to their HR at the end of the financial year. It details all tax-saving investments (80C, 80D, home loan interest, rent receipts) along with physical proofs, allowing the HR to calculate and deduct the correct TDS.

11. What happens if I change jobs mid-year and do not submit Form 12B?

If you change jobs and do not declare your previous salary details to your new employer in Form 12B, both employers will apply basic exemptions and standard deductions. This leads to double-benefit claims and results in a large tax liability plus interest when you file your ITR.

12. How is Leave Travel Allowance (LTA) exempt from tax?

LTA covers travel tickets (air, rail, bus) for yourself and your family within India. It can be claimed tax-free twice in a block of 4 calendar years under Section 10(5) (Old Regime only). The exemption is restricted to the actual travel cost, not hotel or food expenses.

13. What is the difference between Form 16 Part A and Part B?

Part A is generated from the income tax portal and contains quarterly TDS summaries deposited under your PAN. Part B is issued by your employer and contains a detailed calculation of your gross salary, exempted allowances, deductions under Chapter VI-A, and net tax payable.

14. Why is my monthly TDS in salary slip different from month to month?

TDS is calculated by projecting your annual taxable income and dividing the estimated tax by the remaining months in the year. If you declare investments late (e.g. in January) or receive a variable bonus, your projected income changes, causing the monthly TDS to be adjusted.

15. Can I claim deductions if my employer has already deducted TDS based on full salary?

Yes. If you missed submitting investment proofs to your HR on time, you can still claim deductions like Section 80C, 80D, and HRA directly when filing your ITR, and claim a refund for the excess TDS deducted by your employer.