Gross salary diffrnce in pay slip & form 16

Hi Dharmender,

Great question! The difference between Gross Salary in payslip and Gross Salary shown in Form 16 for a Central Government employee usually arises due to the way GPF (General Provident Fund) contributions are treated for tax purposes.

Why is there a difference?

1. Gross Salary in Payslip:
   This generally shows salary components actually paid or payable to the employee excluding the employee’s own contribution to GPF. The GPF contribution is deducted from the salary, so it is shown as a deduction, reducing the take-home pay.

2. Gross Salary in Form 16:
   For tax computation, employee’s contribution to GPF is added back to the Gross Salary. This is because Form 16 shows the Gross Salary before deduction of any contributions like GPF (it's the salary “deemed” to be received before such deductions).

Is employee’s GPF contribution added back in gross salary?

• Yes, employee contribution to GPF is added back to gross salary to arrive at the gross taxable salary. This is done because while the contribution is deducted from salary, it still counts as part of gross income before considering exemptions.

• However, under Section 80C, the employee can claim deduction for their GPF contribution (up to Rs 1.5 lakh), so it eventually reduces taxable income.

Summary

• Payslip Gross Salary = Salary after deducting employee’s GPF contribution.

• Form 16 Gross Salary = Salary before deducting employee’s GPF contribution (hence higher).

• Employee’s GPF contribution is added back to show true gross income but will be deducted while calculating taxable income under Section 80C.