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.

The actual document

A real slip, with the lines that decide things marked

Nimbus Retail Services Pvt Ltd

Payslip · August 2026

Employee: R. Deshpande
Employee ID: NRS/2026/0418
UAN: 1012 3456 7890
Location: Pune, Maharashtra
Days paid: 31 of 31
Regime: New (default)

Earnings

Basic₹15,000
House Rent Allowance₹6,000
Conveyance allowance₹1,600
Special allowance₹9,500
Gross earnings₹32,100

Deductions

Provident Fund₹1,800
Professional tax₹200
Income tax (TDS)₹0
Total deductions₹2,000

Paid by the company on your behalf — not deducted from you

Employer PF → your EPF₹550
Employer PF → pension (EPS)₹1,250
Employer PF total₹1,800

Net pay credited₹30,100

A fictional slip for a fictional employee. Employers lay theirs out differently and name the lines differently — the arithmetic is what transfers, not the layout.

Tap a numbered marker to see what that line means.

1
Basic. The smallest line here and the one that decides the most. Your PF, your gratuity and the ceiling on your HRA exemption are all worked out on this figure — not on the gross, and not on the CTC.
2
House Rent Allowance. 40% of basic, because Pune is not a metro for this rule — Delhi, Mumbai, Kolkata and Chennai get 50%. Under the new regime, which this slip is on, none of it is exempt anyway.
3
Special allowance. The balancing figure. It is whatever is left after the named components, which is why two people on the same CTC can have very different basics — and very different PF.
4
Provident Fund. 12% of basic, not of gross. It leaves your pay but not your name — this is the one deduction on the slip that is still your money.
5
Professional tax. Charged by Maharashtra, not by the Centre, which is why a friend on the same salary in Delhi pays none. It is ₹300 in February to round the year to ₹2,500.
6
Income tax (TDS). Nil, and correctly so. ₹32,100 a month is ₹3,85,200 a year, and after the ₹75,000 standard deduction the rebate under section 87A wipes out the tax. A zero here is not an error to report.
7
Employer PF → pension (EPS). Here is the ₹1,250 the passbook never shows as EPF. It is 8.33% of the ₹15,000 wage ceiling, and it buys a monthly pension later instead of a balance you can withdraw. The company paid ₹1,800; only ₹550 of it joined the fund you can see.
8
Net pay credited. ₹32,100 earned minus ₹2,000 taken out. This is the only figure on the slip that matches your bank statement — and it is nowhere near the CTC this job was offered at, because the employer's ₹1,800 and the gratuity provision are counted in that and never appear here.

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

The job each line on the slip does.

Basic

HRA

EPS

EPF

Gratuity

Drag each meaning up or down until it sits beside the term it belongs to.

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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