Salary & Payslip Terms Glossary

Put these terms to use: calculate your CTC to in-hand salary, check HRA exemption, compare New vs Old tax regime, or understand how TDS works.

Your payslip and offer letter are full of acronyms and jargon. Here's a plain-language explanation of every term you're likely to encounter as a salaried employee in India.

C

CTC — Cost to Company

The total annual cost an employer incurs for an employee. Includes basic salary, HRA, allowances, employer PF contribution, gratuity provision, insurance, and other benefits. CTC is always higher than your in-hand salary. See: How CTC is Calculated.

CTC vs Gross vs In-Hand

CTC = everything the company spends on you. Gross Salary = cash components paid to you (before deductions). In-Hand / Net Salary = amount credited to your bank after all deductions (PF, PT, TDS).

D

DA — Dearness Allowance

A cost-of-living adjustment paid to government employees and PSU employees to offset inflation. Revised every 6 months based on the Consumer Price Index (CPI). Not applicable in most private sector companies.

E

EPF — Employee Provident Fund

A mandatory retirement savings scheme under the Employees' Provident Fund Organisation (EPFO). 12% of basic salary is deducted from your salary (employee contribution) and your employer contributes another 12% (employer contribution). The employer's share is split: 8.33% goes to EPS (pension) and 3.67% goes to EPF. Current interest rate: 8.15-8.25% per year. Tax-free at maturity.

EPS — Employee Pension Scheme

Part of the employer's 12% PF contribution. 8.33% of basic salary (capped at ₹1,250/month) goes to EPS. This builds your pension entitlement after 10 years of service. At retirement, you receive a monthly pension based on years of service and average salary.

ESOP — Employee Stock Option Plan

The right to buy company shares at a pre-set price (exercise price) in the future. ESOPs are taxed at two points: (1) At exercise — the difference between fair market value and exercise price is taxed as salary income. (2) At sale — capital gains tax on the profit from FMV at exercise to sale price.

F

FBP — Flexible Benefit Plan

A component of CTC where employees can choose between taxable cash and tax-exempt reimbursements. Common FBP components: LTA (Leave Travel Allowance), meal vouchers, phone/internet bills, books and periodicals. Choosing reimbursements over cash saves income tax.

Form 16

A TDS certificate issued by your employer by June 15 each year. Part A shows TDS deposited quarter-wise. Part B shows salary breakdown, exemptions, and deductions. Used to file ITR. See: What is Form 16.

Form 26AS

An annual tax statement available on the income tax portal that shows all TDS deducted against your PAN from all sources — salary, bank interest, property sale, etc. Always cross-check Form 16 against Form 26AS before filing ITR.

G

Gratuity

A statutory benefit payable after 5 continuous years of service. Formula: (Basic + DA) × 15 × years ÷ 26. Maximum tax-exempt gratuity for private sector: ₹20 lakh (proposed to increase). Included in CTC as ~4.81% of basic per year, but paid only when you leave after 5+ years.

Gross Salary

Total salary paid to you before deductions. Gross = Basic + HRA + Special Allowance + other allowances. Does not include employer PF or gratuity. Gross is less than CTC but more than in-hand salary.

H

HRA — House Rent Allowance

An allowance paid by employers for accommodation expenses. Typically 40-50% of basic salary. Partially tax-exempt under Section 10(13A) if you pay rent — only under Old Tax Regime. See: HRA Exemption Calculator.

I

In-Hand Salary / Net Salary / Take-Home

The actual amount credited to your bank account every month. In-hand = Gross Salary − Employee PF − Professional Tax − TDS (income tax). Use our CTC to In-Hand calculator to compute yours.

ITR — Income Tax Return

The annual tax filing document submitted to the Income Tax Department. Salaried employees typically file ITR-1 (Sahaj) if income is only from salary and interest. Due date for salaried employees: July 31 every year (for the previous financial year).

L

LTA — Leave Travel Allowance

An allowance for domestic travel expenses. Tax-exempt for actual travel costs for yourself and family within India — twice in a block of 4 calendar years. Air travel reimbursement is capped at economy class airfare. LTA is only available under the Old Tax Regime.

N

NPS — National Pension System

A voluntary retirement savings scheme regulated by PFRDA. Employee contributions to NPS are deductible under Section 80CCD(1B) — up to ₹50,000 over and above the 80C limit of ₹1.5L. Employer contributions under Section 80CCD(2) are deductible in both Old and New regimes. At retirement, 60% of corpus is tax-free; 40% must be used to buy an annuity.

P

PF / EPF / EPFO

See EPF above. PF is the common term for EPF. EPFO is the Employees' Provident Fund Organisation — the government body that manages EPF accounts. Check your PF balance on the EPFO Member Portal (passbook.epfindia.gov.in) using your UAN.

Professional Tax (PT)

A state-level tax on employment. Maximum ₹2,500/year. Applicable in Maharashtra, Karnataka, West Bengal, Tamil Nadu, Andhra Pradesh, Telangana, Gujarat, and a few others. Not levied in Delhi, UP, and most North Indian states. See: Professional Tax by State.

S

Standard Deduction

A flat deduction from gross salary income with no documentation needed. ₹75,000 under the New Tax Regime and ₹50,000 under the Old Regime (from FY 2024-25 / Budget 2024). Available to all salaried employees and pensioners automatically.

Surcharge

An additional tax on income tax (not on income) for high earners. Applies when total income exceeds ₹50 lakh. Rates: 10% (₹50L-₹1Cr), 15% (₹1Cr-₹2Cr), 25% (above ₹2Cr). Most salaried employees are not affected by surcharge.

T

TDS — Tax Deducted at Source

Income tax deducted by your employer each month from your salary before paying you. The employer deposits TDS with the government on your behalf. You can claim TDS as credit when filing ITR. TDS is computed based on your estimated annual salary and tax liability.

TAN — Tax Deduction Account Number

A 10-digit alphanumeric number issued to entities that deduct TDS (your employer). Appears on Form 16. Different from PAN (your personal tax ID).

U

UAN — Universal Account Number

A 12-digit number assigned to every EPF member by EPFO. Remains the same across jobs — when you switch employers, your new employer links their EPF to the same UAN. Use UAN to check PF balance, download passbook, and transfer PF online.

V

Variable Pay / Performance Bonus

The component of salary linked to individual, team, or company performance. Not guaranteed. Typically 10-30% of CTC for corporate roles. Fully taxable as salary income in the year it is paid (not when earned).