A salary slip is a document containing complete information of the employee such as salary and other benefits, deductions, tax payments to be made and the amount after deducting taxes, credits and other deductions. An employer has to issue a salary slip quoting all the revenue and deductions made concerning an employee’s salary before it is paid. This is following Section 6 of the Income Tax Act of 1961. Additionally, it must also have information on allowances, bonus calculation and leave encashment along with instructions on filing the TDS returns and estimating the standard deduction us 16 ia. Visit here for more info.
Salaried employees are eligible for payslips and your employer is responsible for distributing them to you each month. If you are employed by a smaller company that doesn’t provide salary slips, you can get a Salary Certificate from them. Some employers may give you hard copies of your payslips, but many others offer electronic ones.
Salary slip is important for each employee, to know the amount of salary received by them. As it is a legal document and contains various information about an employee, such as gross salary given to the employee, applicable allowances and deductions which include EPF withdrawal and PPF contribution, childcare allowance, house rent allowance, etc. To know the tax deduction on each of these components, you should figure out the value of each component separately.
1) Planning and paying Taxes
A salary slip is very important for income tax planning as it always contains the breakup of taxes that you have to cough up for a whole year. However, understanding the nature of the individual elements making up your salary is not just interesting, but can help you plan your tax savings effectively in case you make the maximum use of some deductions and exemptions under tax laws.
2) Pursuing Higher studies
Salary slip also serves the purpose of legal proof of the last salary and employment and designation. If you plan to apply for a visa or to executive programs at various universities, you may have to submit copies of your salary slip from your employer along with other application forms. A salary slip is also known as a pay slip and salary account statement, as it helps track the payment made by one’s employer or the client.
3) Important while applying for credit or debit cards and loans
It is easy to overlook the importance of salary slips. Many fail to realize that a salary slip can help them get a loan, credit cards, and take other advances. The salary slip acts as identity proof for any financial assistance or credit card facility.
While applying for a loan, mortgage, credit card or even a mobile connection, you may be asked to submit a salary slip. This is a legal requirement in India as per the guidelines issued by the Reserve Bank of India (RBI).
4) For future employment
If you are looking for employment, it can be used as a negotiating point during salary negotiation with your prospective employer.
