A salary slip/ pay slip is a document issued by an employer to an employee.  ****It contains a detailed description of the employee’s salary components like HRA (House Rent Allowance), LTA (Leave Travel Allowance), Bonus paid, etc, and deductions for a specified time period, usually a month. Employers are legally bound to issue salary slips to their employees periodically, as proof of salary payments to employees and deductions made.

Importance of salary slip

Basis for income tax payment - The salary slip forms the basis for income tax calculation. It helps to prepare the Income Tax Returns (ITR) and determine how much tax is to be paid or how much refund is to be claimed by the employee for the year.

Provides access to various facilities - The salary slip gives employees access to various free or subsidised facilities provided by the government such as medical care, subsidised food grains, etc.

Helps to borrow - Salary slips provide lenders with assurance that their lendings will be repaid. It is an important document to avail loans, credit, mortgage and other borrowings from banks and financial institutions.

Helps assess offers - Employees can compare offers from new employers based on their previous salary slips. It also helps them negotiate salary with new employers or for new roles.

Proof of employment - Salary slips are important legal evidence of employment. Often, while applying for travel visas or to universities, applicants are asked to furnish a copy of their salary slip as proof of employment and designation.

Helps to avail loans - A salary slip contains all the details of the salary. It acts as legal proof of the ability to repay the credit taken as a loan within a prescribed time limit. It helps to assess the financial stability of the employee seeking a loan. Therefore, a salary slip is a document that is required when applying for a loan or even a credit card. Banks and lending institutions usually ask for past two to three months’ salary slips at the time of granting loans.

The creditworthiness of the borrower/employee is analysed based on the salary slips. When the employee avails a loan, then every month a fixed EMI will get deducted from the salary received by the employee. Thus, the salary slip also helps in setting a credit limit and is an effective asset during the time of providing the loan.

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