Basic is rarely the largest line on the slip. Why does its size decide more than it looks?

PF, gratuity and the ceiling on your HRA exemption are all worked out on it

It is the only part of your pay that is taxed

Nothing follows from it — it is a label for part of the same money

HRA exemption is capped at the LEAST of three amounts. Which three?

HRA received; 50% of basic in Delhi, Mumbai, Kolkata or Chennai (40% elsewhere); rent paid minus 10% of basic

HRA received; your actual rent; whichever your employer decides

The same three amounts, but whichever is largest

Lesson 1 of 2 · 8 min

What each line is

Basic drives your PF, your gratuity and the ceiling on your HRA exemption — and the employer's PF splits in two before it ever reaches your passbook.

Basic is usually 40–50% of CTC and is the most consequential number on the slip even though it is rarely the largest. Your PF is calculated on it, your gratuity is calculated on it, and your HRA exemption is capped as a share of it.

HRA is exempt only under the old regime, and only up to the LEAST of three amounts: the HRA you received, 50% of basic in Delhi, Mumbai, Kolkata or Chennai (40% elsewhere), and rent paid minus 10% of basic.

That third amount is the one that catches people out. If your rent is below 10% of basic, the exemption is nil however much HRA you are paid.

Where the employer’s PF actually goes

This split is why the passbook never matches the payslip. Note that someone who joined EPF after 1 September 2014 above the wage ceiling is not an EPS member at all — in that case the whole employer share goes to EPF.
Line	On a ₹15,000 basic	Destination
Your contribution	₹1,800	Your EPF
Employer contribution	₹1,800	Split, below
— to the pension scheme	₹1,250	EPS, if you are a member
— to your EPF	₹550	Your EPF balance

The company paid ₹1,800. My passbook says otherwise.

KabirTara

Kabirasking
My payslip says the company put in ₹1,800 too. But the passbook moved by about ₹550 more than my own bit. Is somebody taking a cut?
Taraexplaining
Nobody is taking anything. On a ₹15,000 basic, ₹1,250 of that ₹1,800 is routed to the pension scheme instead of your fund. Only ₹550 lands in the balance you can actually see.
Kabirasking
So the ₹1,250 is gone?
Taraexplaining
Not gone. Somewhere else. It buys a monthly pension later rather than a lump sum you can withdraw. Different pocket, different rules for getting it out.
Kabirasking
Then why does the payslip show one number and the passbook another? That feels deliberate.
Taraexplaining
The payslip shows what the company paid. The passbook shows what one of the two destinations received. Neither is lying — nobody thought to put the split in front of you.

Match them up

Five lines, and what each one actually does

Pick a line from the slip, then pick the job it does.

Pick a term on the left.

Work it out yourself

Put your own offer letter in — the basic share matters more than the headline CTC.

CTC to In-Hand Salary Calculator

Your turn

Your basic is ₹40,000 a month. What is your own 12% PF contribution, in rupees?

Check yourself

1 / 3

Kabir asks

Your slip shows the employer putting in ₹1,800 on a ₹15,000 basic. The passbook moves by only about ₹550 more than your own deduction. Where is the rest?

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