Understanding Your Indian Payslip When You Work for a Foreign Company

Your first payslip working for a company abroad can be confusing. The company is in New York, but the slip is in rupees, full of Indian abbreviations, and the amount that reaches your bank is noticeably less than the salary you were quoted.

None of that is a mistake. Your payslip is a standard Indian payslip, governed by Indian law, and once you know what each line means, it stops being a mystery.

This guide walks through it top to bottom: who actually pays you, what every earning and deduction is, and why your take-home sits below the number in your offer.

Who pays you, and why Indian law shapes your payslip

Start with the most important fact, because it explains everything else. Even though you work for a company abroad, that company usually cannot employ you directly in India without a local entity. So it employs you through an Employer of Record, an Indian company that becomes your legal employer. If that structure is new to you, our guide to who your legal employer is under an EOR explains it in full.

That single fact is why your payslip is entirely Indian. Your legal employer is an Indian company, so it must run payroll under Indian law: the Employees' Provident Fund Act, the Employees' State Insurance Act, the Income Tax Act, and your state's professional tax rules. Every line on the slip is one of those laws in action.

In other words, your payslip looks exactly like that of someone working for an Indian company down the road, because in the eyes of the law, that is what you are.

The earnings side, line by line

The top half of your payslip lists what you earn before anything is taken out. It usually breaks into these parts.

• Basic salary. The core of your pay, often 40% to 50% of the total. It matters beyond its size, because your provident fund, gratuity, and HRA exemption are all calculated from it.
• House Rent Allowance (HRA). An allowance towards rent. If you live in rented accommodation, part of it can be exempt from tax under the old regime.
• Special allowance. A balancing figure that makes up the rest of your salary. It is fully taxable.
• Other allowances. These vary by employer and may include Leave Travel Allowance (LTA), conveyance, or reimbursements.

Add these together and you get your gross salary, the total before deductions.

The deductions side, line by line

The lower half lists what is taken out before the money reaches you. Four items are common.

• Provident Fund (PF). You contribute 12% of your basic salary to the Employees' Provident Fund, and it lands under your Universal Account Number (UAN), which stays with you across jobs. Your employer contributes too, though that part sits in your CTC rather than as a deduction. See our EPF explainer for how it grows.
• ESI. If your gross wages are within the covered limit of Rs 21,000 a month, you contribute 0.75% to Employees' State Insurance, which funds medical and other benefits. Above that limit, ESI does not apply and will not appear.
• Professional tax. A small state-level tax on your income, capped at Rs 2,500 a year. Some states do not levy it at all.
• Tax deducted at source (TDS). Your income tax, deducted every month by your employer under Section 192 and deposited against your PAN. At year end you receive a Form 16 summarising it.

Gross salary minus these deductions is your net pay, the amount that actually reaches your bank.

Gross, net, and CTC: the three numbers people confuse

Most payslip confusion comes from mixing up three figures.

• CTC (Cost to Company) is the full annual cost of employing you. It includes your gross salary plus the employer's PF contribution, gratuity, and any insurance. It is the biggest number, and it is not what you take home.
• Gross salary is your total earnings before deductions.
• Net pay is what lands in your account, after PF, professional tax, and TDS.

Here is how a simple monthly slip fits together, with example numbers.

The gap between the CTC in your offer and the net pay on your slip is normal. It is not money lost, it is your own retirement savings and your taxes, being set aside as the law requires.

Your tax regime shows up here

The TDS line is not a fixed percentage. Your employer estimates your tax for the whole year and spreads it across twelve months, based on the tax regime you chose.

Under the new regime, which is the default, you get a standard deduction of Rs 75,000 but very few other exemptions. Under the old regime, you can claim exemptions like HRA and deductions like Section 80C, which lower your taxable income and so your TDS.

This is why the same salary can show different TDS for two people: they picked different regimes. If you are weighing which one suits you, our guide to income tax for the year explains the slabs and the trade-off.

What to check on every payslip

A payslip is also a record you should verify, not just file away.

• Your PF is being deposited. Check that the provident fund deduction actually reaches your UAN, which you can track on the EPFO portal.
• Your TDS looks right. If it swings wildly month to month, ask payroll, since it usually means your declared investments or regime were not updated.
• The components are stable. Sudden changes to your basic or allowances can affect your PF and tax, so query anything unexpected.
• It reconciles to your Form 16. At year end, the totals on your payslips should match your Form 16 before you file your return.

If anything looks off, your first stop is the EOR that employs you, since it runs your payroll. Knowing what to ask upfront helps too, which is why we put together a checklist of questions to ask before signing an EOR contract.

Conclusion

Your Indian payslip is not complicated once you see the logic behind it. You are legally an Indian employee, so Indian law sets out what you earn, what is deducted, and what you take home.

Read it in three steps: your earnings at the top, your deductions below, and the net pay at the bottom. Check your PF and TDS each month, reconcile it to your Form 16 at year end, and your pay stays transparent, no matter where in the world your employer sits.