How to Read Your Salary Slip: CTC, Gross, Net and the New Labour Codes
Most people only look at the final amount. Learn what each line means, why CTC is not what you receive, and what the new labour codes changed about wages and gratuity.
Your salary slip is the best financial document you receive every month, yet few people read it. Understanding it helps you negotiate better, plan taxes, and spot mistakes.
The three numbers to know
- CTC (Cost to Company): the total yearly cost of employing you, including things you never see as cash, such as the employer's PF contribution, insurance, and gratuity.
- Gross salary: the pay before deductions, usually basic plus allowances.
- Net (take-home) salary: what reaches your bank account after deductions.
The common lines on a payslip
Basic pay
The core of your salary. PF, gratuity, and some other benefits are calculated on it.
House Rent Allowance (HRA)
Meant to help with rent. Part may be tax-exempt if you pay rent, under the rules.
Special and other allowances
A mix of other payments, including conveyance or special allowance.
Employer's PF contribution
Part of CTC, but it goes into your PF account, not your bank.
Employee's PF deduction
Usually 12 percent of basic wages, deducted from your pay and saved for you.
Professional tax
A small state tax in some states.
TDS (tax deducted at source)
Income tax your employer deducts and pays to the government on your behalf.
What the new labour codes changed
India's four labour codes came into effect on 21 November 2025, bringing many older laws together. Two changes matter for your payslip:
- A common definition of "wages". Wages for statutory purposes are basic pay, dearness allowance, and retaining allowance. If allowances exceed 50 percent of your total remuneration, the extra amount is added back when calculating benefits such as PF and gratuity. This can raise those contributions and lower take-home pay for some people.
- Gratuity rules. Gratuity is a lump sum paid by employers for long service. It is generally payable after five years of continuous service, but that condition does not apply in cases such as death, disablement, or the end of a fixed-term contract. Under the usual formula, gratuity is about 15 days of last drawn wages for each year of service.
Detailed rules from the central and state governments were still being finalised after the codes took effect, so some specifics may continue to change.
5 things to check every month
Net pay matches the bank credit
Look for missing amounts.
PF deduction is credited
Check your EPF passbook on the member portal.
TDS is correct
Compare it with your tax plan, and make sure your declarations are up to date.
Leave balance and bonuses are right
Errors happen.
Days worked are accurate
Unpaid leave can reduce pay.
When you compare job offers
- Compare take-home, not CTC.
- Ask how much of CTC is fixed and how much is variable and not guaranteed.
- Ask about insurance, notice period, and bonus rules in writing.
What most people miss
- Variable pay is not guaranteed. A bonus counted in CTC may be paid partly or not at all.
- A high CTC with high allowances may trigger the 50 percent rule, raising PF and gratuity and lowering cash in hand.
- Keep your payslips and Form 16. You will need them for loans, visas, and tax filing.
