Indian Salary Slip Explained: Basic, HRA, PF, ESI, PT and TDS (2026)
By Ravi Kiran, Co-founder, Saileor Last updated: 3 August 2026. All statutory figures verified against notifications current as of this date. The worked example uses round numbers to show how the parts fit together, not exact tax for any one person.
The first time you look at an Indian salary slip, it reads like a wall of short words. Basic. HRA. PF. ESI. PT. TDS. Gross. Net. Then the question everyone asks: why is the money that lands smaller than the number we agreed?
Once you know what each line means, a payslip reads like a simple story. This guide walks through it line by line, in plain English, with the current rates and thresholds written out so you can check your own numbers against them.
Start with the biggest gap: CTC versus take-home
In India, salaries are usually quoted as CTC, which stands for Cost to Company. It is the full yearly cost of employing someone, everything added together. It is not the money that reaches their bank account.
Take-home pay, the amount that actually lands each month, is lower. In between sit savings that belong to the employee but are set aside, and taxes that go to the government. Nothing is lost. It is just parked in different places.
Knowing this gap early saves a lot of confusion. The person you hire cares about take-home. Your budget cares about CTC. They are two different numbers and both are correct.
The one idea that unlocks the whole slip A payslip has two halves. The top half is what you earn, split into parts. The bottom half is what gets taken out, split into deductions. Take-home is simply the top minus the bottom.
The top half: what makes up the pay
Basic
This is the core of the salary and the number most deductions are measured against.
Since the four Labour Codes came into force on 21 November 2025, there is a hard rule here. Under the Code on Wages, 2019 and the Code on Social Security, 2020, at least 50% of an employee’s total remuneration must be treated as “wages,” meaning Basic plus dearness allowance plus retaining allowance. This is usually called the 50% wage rule.
It matters because Provident Fund and gratuity are calculated on that wage base. Companies used to keep Basic artificially low to reduce PF cost and lift take-home. That structure is no longer compliant. A correct salary structure now has a real Basic, which means higher retirement savings and slightly lower take-home today.
HRA, or House Rent Allowance
Money toward rent. Employees who pay rent can claim part of it tax-free under the old tax regime, which is why almost every Indian salary includes it. It is a normal, expected line.
Other allowances
The smaller pieces: special allowance, travel or meal allowances, and so on. They round out the pay and give some room for tax planning. You do not need to master each one. They are all part of the earning side.
The bottom half: what gets deducted
PF, or Provident Fund
India’s main retirement savings scheme.
The employee contributes 12% of wages, and the employer contributes a matching 12%. But contribution is only mandatory up to a wage ceiling of ₹15,000 per month. On wages of ₹15,000 or more, the required employee contribution is exactly ₹1,800 per month, with the employer matching ₹1,800.
Two things changed recently and both are worth knowing:
- On 29 May 2026, the Ministry of Labour and Employment notified ₹15,000 per month as the statutory wage ceiling under the Code on Social Security, 2020. This kept the ceiling where it has been since 2014. A proposal to raise it to ₹25,000 is real and pending, but no decision has been taken and no gazette notification has been issued.
- On 29 June 2026, the Employees’ Provident Fund Scheme, 2026 was notified. It codifies that contributions above ₹1,800 per month are voluntary rather than automatic. This was already the position in law, but the new Scheme makes it explicit and changes how payroll must present it.
If your company contributes on full Basic rather than on the ₹15,000 ceiling, that is a choice, not a legal requirement. Many employers do it. Make sure your payslip shows which one you are doing.
This money is not gone. It sits in the employee’s own EPFO account and earns interest.
ESI, or Employees’ State Insurance
Health and injury cover. The point most employers miss: it only applies to lower-paid staff.
- Wage ceiling: ₹21,000 per month in gross wages. Employees at or below this are covered. Employees above it are exempt. This threshold has not changed since January 2017, and as of August 2026 no notification has raised it.
- For persons with disabilities the ceiling is ₹25,000 per month.
- Rates: employee 0.75% of wages, employer 3.25%.
Three details that cause real errors:
It is gross wages, not Basic. The most common mistake is checking Basic alone. Someone with Basic ₹18,000 and HRA ₹4,000 has gross wages of ₹22,000, is above the ceiling, and is exempt. Deducting ESI for them is wrong.
Crossing the ceiling mid-period does not end coverage. ESI runs on two contribution periods, April to September and October to March. If an employee was below the ceiling at the start of a period and gets a raise that pushes them above it, they stay covered until that period ends. Stopping the deduction immediately creates a gap that ESIC flags at reconciliation.
Coverage is now nationwide. Under the Code on Social Security, ESI no longer applies only in specifically notified areas.
If you are hiring engineers or senior staff, ESI will simply not appear on their slip. That is correct, not an omission.
PT, or Professional Tax
A small state tax on holding a job.
- It is levied by state governments, not the centre, under Article 276 of the Constitution.
- The annual maximum is ₹2,500 per person, a constitutional cap that applies everywhere.
- Roughly 21 to 22 states levy it. Delhi, Uttar Pradesh, Haryana, Punjab, Rajasthan, Himachal Pradesh and Uttarakhand do not. An employee in Gurgaon or Noida pays nothing.
- Slabs, thresholds and filing frequency differ by state. Some states deduct monthly, others half-yearly.
- Maharashtra has a quirk worth knowing: the deduction is ₹200 in most months and ₹300 in February, so the year totals ₹2,500.
PT is deducted based on the state where the employee works and where payroll is processed. Getting this wrong across a multi-state team is one of the most common payroll errors in India.
State slabs change by notification. Check the relevant state portal, or ask us, before you set them in payroll.
TDS, or Tax Deducted at Source
Income tax, taken out a little each month instead of one bill at year end. The amount depends on total pay, the employee’s declared investments, and whether they choose the old or new tax regime.
On lower salaries it can be zero. On higher salaries it is usually the largest single deduction on the slip. It is the one line that genuinely varies from person to person, which is why we have not put a number on it below.
Quick reference: the statutory numbers
| Item | Threshold | Employee share | Employer share |
|---|---|---|---|
| Provident Fund | Wage ceiling ₹15,000/month | 12% of wages, max ₹1,800/month | 12% of wages, max ₹1,800/month |
| ESI | Gross wages up to ₹21,000/month (₹25,000 for persons with disabilities) | 0.75% of wages | 3.25% of wages |
| Professional Tax | Set by each state; not levied in Delhi, UP, Haryana, Punjab, Rajasthan and others | Capped at ₹2,500 per year | Nil |
| TDS | Depends on total income and tax regime | Varies | Nil |
| Wage definition | At least 50% of total remuneration must be “wages” | Applies from 21 November 2025 | Applies from 21 November 2025 |
Putting it together: a worked example
Say you agree a package of ₹1,00,000 per month. Here is roughly how it splits. Numbers are rounded to keep the shape clear.
| Line | Type | Amount per month |
|---|---|---|
| Basic | Earning | ₹50,000 |
| HRA | Earning | ₹25,000 |
| Other allowances | Earning | ₹25,000 |
| Gross | ₹1,00,000 | |
| Provident Fund (employee) | Deduction | ₹1,800 |
| Professional Tax | Deduction | ₹200 (varies by state) |
| Income Tax (TDS) | Deduction | Varies |
| Take-home | Gross minus deductions |
Notice Basic is exactly 50% of the package. That is the 50% wage rule at work, not a coincidence.
ESI does not appear here, because gross wages of ₹1,00,000 are far above the ₹21,000 ceiling.
The PF figure is ₹1,800 because contribution is mandatory only up to the ₹15,000 wage ceiling, even though Basic is ₹50,000. If your company chooses to contribute on full Basic instead, that line would read ₹6,000 and take-home would drop accordingly.
Nothing on a payslip is a mystery. Earnings on top, deductions below, take-home is the honest difference.
Why the offer number is not the landing number
Say this out loud to every new hire. The figure you agree is the full package. What lands each month is smaller, because some of it is their own savings and some is tax. It is not a cut. It is how every salary in India works.
Say it plainly at offer time and you avoid an awkward first-payday conversation.
Read any Indian slip in four steps One, add the earnings to find gross. Two, note the savings like PF that stay with the employee. Three, note the taxes like PT and TDS that go to the government. Four, what is left is take-home.
Where Saileor fits
You should never have to build a payslip or track a rate table. As your Employer of Record in India, we compute every line, apply the correct rates for the right state, deduct and deposit the right amounts, and hand the employee a clean, correct slip each month. You approve one number. We turn it into a fully compliant payslip.
Want the numbers done for you? We run accurate, compliant Indian payroll every month, so you never touch a rate table.
Because the offer is usually the full package, or CTC. Take-home is that amount minus the employee's own savings, like Provident Fund, and taxes like professional tax and income tax. Nothing is lost. Some of it is saved in the employee's own account and some goes to the government.
The employee contributes 12% of wages, and the employer matches it. Contribution is mandatory only up to a wage ceiling of ₹15,000 per month, so on wages of ₹15,000 or more the required employee deduction is ₹1,800 per month. Contributions above that are voluntary, a position the Employees' Provident Fund Scheme, 2026 made explicit when it was notified on 29 June 2026.
No. On 29 May 2026 the Ministry of Labour and Employment notified ₹15,000 per month as the statutory wage ceiling under the Code on Social Security, 2020. The proposal to raise it to ₹25,000 is pending, but no gazette notification has been issued.
No. ESI applies only when gross wages are ₹21,000 per month or below, or ₹25,000 for persons with disabilities. On higher salaries it does not appear on the slip at all.
Coverage does not stop immediately. ESI runs on contribution periods from April to September and October to March. An employee who crosses the ceiling mid-period stays covered until that period ends, then exits from the next one.
PF is retirement savings that stays in the employee's own EPFO account. TDS is income tax that goes to the government. One is saving, the other is a tax.
No. It is a state tax. Around 21 states levy it and the rest do not. Delhi, Uttar Pradesh, Haryana, Punjab and Rajasthan are among the states with no professional tax. Wherever it applies, the total is capped at ₹2,500 per year.
Under the Code on Wages, 2019 and the Code on Social Security, 2020, in force since 21 November 2025, at least 50% of an employee's total remuneration must be treated as wages for calculating PF, gratuity and other statutory benefits. It stops employers from keeping Basic artificially low.
