Salary slips: What they aren’t telling you about taxes

November 20, 2025 Finance Talk Valli Sarvani

Most employees glance at their salary slips without realising they hide key tax details.

While these slips show earnings and deductions, they often omit information critical for filing your income tax return.

Understanding these hidden aspects can help you avoid extra taxes and maximise take-home pay.

A salary slip typically includes earnings like Basic Salary, HRA (House Rent Allowance), DA (Dearness Allowance), LTA (Leave Travel Allowance), special allowances, conveyance, and bonuses.

It also lists deductions such as EPF contributions, professional tax, TDS, ESI, and company-specific cuts.

However, the slip doesn’t reveal the full tax picture.

Not All Allowances Are Tax-Free

Allowances like HRA, LTA, and conveyance appear on your slip but are not automatically exempt. HRA is tax-free only if you pay rent and meet conditions under Section 10(13A). LTA is exempt for actual travel within India, limited to two trips in four years. Without proper documentation, these allowances can become fully taxable.

Take-Home Pay ≠ Taxable Income

Your net salary does not equal taxable income. Employer contributions to PF beyond ₹7.5 lakh, perquisites like rent-free housing or company cars, and bonuses can increase your taxable income. These elements often do not appear on your slip but matter when filing your return.

Tax Deductions Are Not Fully Shown

Salary slips reflect statutory deductions, yet tax-saving investments like PPF, ELSS, life insurance, health insurance, home loan interest, and donations under Sections 80C, 80D, and 80G may not appear. These deductions can significantly reduce your taxable income.

TDS Is Not the Final Tax

TDS deducted is provisional. Your final tax liability depends on all income sources, exemptions, and deductions. Filing your ITR may result in a refund or additional tax payable.

Tax Regimes Matter

Salary slips don’t indicate whether you are taxed under the old regime with exemptions or the new regime with lower rates. Choosing the right option can optimise taxes and increase take-home salary.

Salary slips show earnings and deductions but hide critical tax insights. Reviewing them carefully can save thousands of rupees and prevent surprises during tax season.

Image by Mohamed Hassan from Pxhere (Free for commercial use / CC0 Public Domain)

Image Published on December 07, 2023