How net salary is arrived at
Start with gross earnings for the month, already adjusted for paid days and LOP. Subtract the statutory deductions the employee bears: 12% EPF on basic plus DA up to the ₹25,000 ceiling, 0.75% ESI on gross where gross is up to ₹21,000, professional tax at the state slab, TDS as projected for the year, and LWF where the state levies it. Then subtract voluntary or company recoveries: salary advance, loan EMI, canteen, uniform or damage recovery where lawful.
What remains is net pay. The payslip should show each deduction as a separate line so the employee can verify it, and the total of the net column across all employees must equal the bank transfer file.
What moves in-hand salary month to month
For a fixed-salary employee, three things change net pay: LOP days, professional tax in months where the slab charges more (Maharashtra and Karnataka charge ₹300 instead of ₹200 in February), and TDS adjustments when investment declarations are reconciled late in the financial year.
For wage workers, overtime and incentives add to gross and therefore to net, but they also raise the ESI contribution. A worker who crosses into TDS territory because of a bonus may see a one-time larger deduction.
- LOP reduces gross before deductions, so EPF and ESI fall as well
- PT is a flat monthly slab and does not scale with LOP in most states
- TDS is an annual estimate spread across months and can be revised mid-year
- Advances and loans are recoveries, not statutory deductions, and need written consent
Lawful limits on deductions
The Code on Wages, like the Payment of Wages Act before it, permits only listed deductions: statutory contributions, income tax, fines and recoveries within prescribed limits, absence from duty, damage or loss with due process, advances, and amounts the employee authorises in writing. Total deductions are capped at a percentage of wages under the Code, so an employer cannot recover a large advance in one month if that breaches the cap.
Deducting for late coming beyond the actual time lost, or for uniform costs without consent, is a common SME practice that does not survive an inspection.
An office executive in Pune has basic ₹15,000, HRA ₹7,500 and special allowance ₹7,500, so gross is ₹30,000. Employee EPF is 12% of ₹15,000 = ₹1,800. Gross exceeds ₹21,000, so no ESI. Maharashtra professional tax is ₹200. Annual gross of ₹3.6 lakh is below the taxable threshold under the new regime, so TDS is nil. Net salary is ₹30,000 − ₹1,800 − ₹200 = ₹28,000.
Attend Mitra's payroll preparation computes net pay from attendance-derived paid days, with EPF, ESI, PT and TDS settings applied per employee, and generates payslip PDFs and a NEFT file whose total matches the salary register.