Salary Deductions in India
Last updated: 13 July 2026. General explainer, not legal or tax advice.
At a glance
Statutory deductions
Statutory deductions are the ones the law requires. The employee's provident fund share, at 12 percent of basic and dearness allowance, professional tax where the state levies it, and TDS on salary are the main ones. Employee state insurance also applies where the employee's monthly wages are within the coverage ceiling. These amounts go to the government or the relevant fund.
Other deductions
Beyond the statutory list, a payslip may carry loss of pay for unpaid absence, recovery of a salary advance or loan, and voluntary items the employee has opted into, such as extra provident fund or an insurance premium. These come from policy or the employee's own choice rather than from a statute.
The gross to net bridge
Deductions are what turn gross into net. Gross sits at the top of the payslip, each deduction is listed in the middle, and net pay is what remains at the bottom. A clear itemised list is the difference between an employee who trusts their payslip and one who queries it every month.
Deductions have to be lawful
An employer cannot deduct whatever it likes. The principles under the wages law limit deductions to those that are authorised or agreed, which is why arbitrary fines or unexplained cuts are a problem. Every deduction should trace to a statute, a policy, or the employee's consent.
A payslip an employee can trust
The point of itemising deductions is trust. When an employee can see gross at the top, each statutory and policy deduction named in the middle, and net at the bottom, there is nothing to argue about. When deductions are bundled or vague, every payslip becomes a question.
This matters most in the months something changes, a new deduction, a loss of pay, a revised TDS. A clear line, with a name the employee recognises, turns what could be a complaint into a glance. Offrd itemises each deduction for exactly this reason.
Worked example
On a gross of 50,000 rupees with a 25,000 basic, provident fund is 3,000, professional tax is around 200, and TDS might be 2,000, so deductions total about 5,200 and net pay is near 44,800. Employee state insurance does not apply here, since the wage is above its coverage ceiling.
Related terms
Frequently asked questions
What are the main statutory salary deductions in India?
The employee provident fund share, professional tax where the state charges it, TDS on salary, and employee state insurance where wages fall within its ceiling.
What is the difference between statutory and other deductions?
Statutory deductions are required by law and go to the government or a fund. Other deductions, like loss of pay or a loan recovery, come from policy or the employee's own choices.
Is employee state insurance always deducted?
No. It applies only where the employee's monthly wages are within the coverage ceiling. Above that, ESI is not deducted.
Where can I see my deductions?
On the monthly payslip, which itemises each deduction between the gross at the top and the net at the bottom.
Can an employer deduct anything it wants?
No. Deductions must be authorised by law, by policy, or by the employee's consent. Arbitrary cuts are not allowed under the wages law.
Why should deductions be itemised on the payslip?
So an employee can see gross, each named deduction, and net. A clear breakdown prevents the monthly queries that vague or bundled deductions create.
What makes a deduction hard to trust?
Bundling several into one line, or using a label the employee does not recognise. Named, traceable deductions are easier to accept.
Sources and official references
The rules and figures on this page trace to the official sources below. Statutory amounts and dates change, so confirm the current number on the source before you act on it.
How Offrd helps
Offrd itemises every statutory and policy deduction on the payslip, so employees see exactly what came out and why.