Your First Salary in India: Payslip, PF and Income Tax Explained
Your first salary credit can be a surprise. The amount in your bank account is usually lower than the figure in your offer letter. Here's why that happens, and what to check in your first few months.
Your First Salary in India: Payslip, PF and Income Tax Explained
CTC isn't the same as take-home pay
Cost to company (CTC) is everything an employer expects to spend on you in a year. It can include items you don't receive as monthly cash, such as the employer's PF contribution, insurance or a performance bonus. Take-home pay is what's left in your account after deductions.
Before you accept an offer, ask for a monthly breakdown. It's reasonable to ask what your estimated in-hand pay will be, and which parts of the package depend on performance.
How to read your payslip
Earnings
This section usually lists basic pay, house rent allowance (HRA) and other allowances. Your basic pay matters because PF is calculated on your PF wages, which are closely tied to it.
Deductions
These are the amounts taken out before you get paid. Common ones are:
- Employee PF: your contribution to the Employees' Provident Fund
- Professional tax: a small state tax that applies in some states
- Income tax (TDS): tax your employer deducts and pays to the government
- ESI: a health and social security contribution that can apply at lower pay levels
Keep your payslips. You may need them for a loan, a rental agreement or your next job application. If an item doesn't make sense, ask payroll or HR to explain it in writing.
How your PF works
The contribution
The standard employee contribution is 12% of PF wages, and your employer contributes as well. Part of the employer's share goes to the Employees' Pension Scheme. The statutory wage ceiling rose from ₹15,000 to ₹25,000 a month from 17 September 2026, according to the Press Information Bureau. Your employer can explain how this affects your pay.
Your UAN and passbook
Your Universal Account Number (UAN) stays with you across jobs. Activate it on the EPFO member portal and check your passbook every few months. The amount deducted on your payslip should appear there along with your employer's share. If deposits are missing, raise it with HR first, and contact EPFO if it isn't fixed.
When you change jobs, give your new employer the same UAN, so all your PF history stays together.
Income tax basics
Choosing a tax regime
India has two regimes, old and new. The new regime is generally the default, with lower rates and fewer deductions. The old regime allows more deductions but has higher rates. Your employer will usually ask which one to use for TDS. Compare both using your own numbers before you choose.
New regime figures for 2026-27
Published guides for 2026-27 show a ₹75,000 standard deduction for salaried people and a rebate that removes tax on taxable income up to ₹12 lakh. That means salary income up to about ₹12.75 lakh may have no tax, if you have no other income and meet the conditions. Check the current figures on the Income Tax Department website, as the rules can change each year.
Form 16 and your tax return
Your employer typically issues Form 16 after the financial year ends, showing your salary and the tax deducted. Compare it with your payslips and your tax records on the income tax portal. Even when no tax is due, filing a return can be useful as a record of your income. A tax professional can advise you on whether you must file.
What to do with your first few salaries
Start simple
You don't need a complicated plan. Work out your fixed costs, then move a set amount into savings as soon as your salary arrives. Aim to build an emergency fund over time, and pay any high-interest debt early.
Watch for easy borrowing
Credit cards, buy-now-pay-later offers and instant loan apps can feel harmless when you first start earning. Their charges can build up quickly if you miss a payment. Be especially careful with unknown loan apps that ask for access to your contacts and photos.
Check your health cover
Find out whether your employer provides health insurance, and what it covers. Our health insurance guide explains what to look for.
Last checked November 2026. This guide is general information, not financial, tax or legal advice. Rules and rates change, so confirm the details with the official source or your provider before you decide.