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A salary component is one line on a payslip. The set of components is defined once for the organization; the payroll engine evaluates all of them for every employee, in order, each time a cycle calculates. Payroll → Components.

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Anatomy of a component

Codes and names are load-bearing. Year-to-date summaries and statutory registers look components up by these values. Renaming BASIC will not break the calculation, but it will break the reports that expect to find it.

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Calculation types

A flat rupee amount. Pro-rated by paid days.
A percentage of the employee’s monthly compensation. Typically how Basic is defined.
A percentage of the Basic line. House Rent Allowance and Provident Fund usually work this way. Combined with cap base, this is how PF is capped at a statutory wage.
A percentage of gross earnings.
Whatever is left over — the amount that makes the earnings sum to the employee’s compensation once every other earning has been computed. A “Special allowance” line typically uses this.
The overtime line. Its amount comes from the day’s shift template multipliers, weighted by whether each day’s overtime was ordinary or on a holiday or rest day.
An AttendanceOT component’s value field is not a rate. It used to be, and is not any more. The component exists to switch overtime pay on and to supply the payslip line’s label; the rate lives on the shift template.
Professional Tax, resolved from state-wise slab bands using the employee’s state, their monthly compensation, and the month.
Income tax deducted at source, computed from the financial year’s slab configuration for the employee’s tax regime: standard deduction, marginal slabs, rebate, cess, divided over twelve months.

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A typical set

Order matters: BASIC must evaluate before anything that is a percentage of it, and SPECIAL (the balancing line) must come last among earnings.

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Editing

Changes take effect the next time a cycle calculates. They do not retroactively alter a cycle that has already been calculated — recalculate it if you want the new definition applied.
Editing components mid-cycle is a good way to produce a payslip nobody can explain. Make component changes between cycles.

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Statutory data

The Professional Tax and income tax slabs behind SlabPT and SlabTDS are seeded reference data, not something you maintain in the app.
Two limits worth knowing. The seeded slabs cover a subset of Indian states and one financial year — there is no screen for adding a state or rolling to a new year. And income tax slabs are configured for the New regime only: an employee on the Old regime produces a TDS of zero rather than an error. Check the regime on your employees’ compensation records before your first live cycle.