Personal finance · 14 min

Reading your payslip

Written and reviewed by Prashant Nandkishor Maheshwari (editorial review, 2026-10-18). Not yet checked by an independent subject specialist. How we review.

What you will learn

Tell gross pay from net pay, understand cost-to-company, and know what each deduction means.

Why it matters

Your payslip is the first document of your finances. Understanding it avoids surprises about take-home pay and shows what is being saved on your behalf.

The ideas

Levels are a learning preference, not a credential. Switch any time.

Novice level

Gross pay is what is earned before deductions. Net pay (take-home) is what reaches your bank account.

Between them come deductions: tax collected at source, contributions to retirement schemes, and sometimes insurance or professional taxes.

Some employers quote a 'cost to company' (CTC) that includes items you never receive as monthly cash. Always ask for the monthly net figure.

Basic level

Typical parts of pay: basic pay, allowances, and variable pay such as bonuses. Retirement contributions are often a share of basic pay, so the split between basic and allowances matters.

Employer contributions (for example to a provident fund) and gratuity are part of CTC but are not paid out monthly.

Check that the tax deducted matches your expected liability, and keep payslips for tax and loan applications.

Advanced level

Compare offers on net monthly pay, retirement contributions and benefits you would otherwise buy, not on headline CTC.

Expert level

Restructuring pay between taxable and non-taxable components can change take-home, but each component has conditions and limits.

Professional level

Payroll must follow wage, social-security and tax law. Employers have duties on timely deduction and deposit; discrepancies should be raised in writing.

Key terms

Gross pay: Pay before deductions.
Net pay: Pay after deductions: your take-home.
CTC: Cost to company: the employer's total yearly cost of employing you.
TDS: Tax deducted at source by the payer.

Worked example

Illustration only, simplified. CTC ₹12,00,000. Basic pay is 40% of CTC: ₹4,80,000. Employer provident fund at 12% of basic: ₹57,600. Gratuity at about 4.81% of basic: ₹23,088. Gross yearly cash pay = 12,00,000 - 57,600 - 23,088 = ₹11,19,312. Employee provident fund 12% of basic: ₹57,600. Professional tax: ₹2,400. Monthly pay before income tax = (11,19,312 - 57,600 - 2,400) / 12 = about ₹88,276. Income tax then reduces this further. Structures differ by employer and country.

Try it yourself

Take your latest payslip or offer letter. Mark gross, each deduction and net. Write what each deduction is for and which ones you can influence. Ask HR about anything unclear.

Nothing you write here is collected. Use paper or the workbook.

Check yourself

Net pay is... Pay before deductions Pay after deductions The company's cost

Employer contributions are usually... Part of CTC but not in monthly cash Paid in cash each month Always zero

A common misunderstanding

'CTC is my salary.' CTC includes employer costs and benefits you do not receive monthly.

Local context

Deductions, social-security schemes and tax rules differ by country and change often. The example uses simplified Indian-style components; check your employer and the tax authority.

References and review

Your tax authority and social-security body (in India, the Income Tax Department and EPFO).
Your employment contract and payslip.

Author and editorial reviewer: Prashant Nandkishor Maheshwari, 2026-10-18. Independent specialist review is pending. Spotted a mistake? Tell us.

Suggested next step

Open the Workbook and map your take-home pay and spending.

Mark this lesson as done on this device (only works if you turn on saving in the privacy page or the workbook)