Kavya manages a pharmacy in Mysuru, one of four run by the same owner. She's applying for a home loan, and the bank has given her a list: three months of payslips, six months of bank statements, her last Form 16, and a salary certificate from her employer. The owner, Suresh, has never written one, and the bank wants it on letterhead by Friday.
This is what goes in it, who signs it, and why the figure the bank reads isn't the one at the top of the certificate.
A salary certificate for loan applications: what it must state
Banks differ a little in what they ask for, but a certificate that states all of this is rarely sent back:
- the employee's full name, as it appears on their PAN, and their employee code;
- their designation, department and date of joining, and that they're still employed;
- the annual CTC and the monthly breakup, with the gross salary totalled;
- the date it was issued, and who it's addressed to, which is usually the branch;
- a signature, the signatory's name and designation, and the company's seal if it has one.
Here's how Kavya's opens, on our free template: “This is to certify that Kavya Gowda (employee code NPR007) has been employed with Nandi Pharma Retail as Store Manager in the Retail department since 14 February 2022.”
| Line | On her certificate |
|---|
| Annual cost to company | ₹4,80,000 |
|---|
| Basic | ₹20,000 |
|---|
| HRA | ₹8,000 |
|---|
| Special allowance | ₹9,238 |
|---|
| Monthly gross | ₹37,238 |
|---|
What the bank reads, in rupees
A lender decides how much EMI you can carry from what actually reaches your account each month. That's neither the CTC nor the gross. For Kavya, worked out by the same engine as our salary calculator, with PF on the ceiling and Karnataka's professional tax, under the new tax regime:
₹40,000CTC, a twelfth of it
₹37,238monthly gross, on the certificate
₹35,230in-hand, on her payslip
The ₹2,008 between the gross and her in-hand is ₹1,800 of her own PF and about ₹208 a month of professional tax. At this salary the new regime leaves her no income tax to pay, so there is no TDS. The certificate proves the employment and the salary; the payslips and the bank statement prove the in-hand. That's why the bank asks for all three, and why the certificate shouldn't try to state a net figure the payslips will contradict. How CTC turns into take-home is in CTC to in-hand salary.
One line worth keeping: the template closes with “This is a certificate of employment and earnings issued by the employer. It is not the certificate of tax deducted at source under section 203 of the Income-tax Act, which is issued separately and carries the deductor’s tax deduction account number.” Kavya's bank will almost certainly ask whether the certificate is her Form 16. That sentence answers it on the paper.
Salary certificate vs salary slip
| Salary certificate | Salary slip |
|---|
| Covers | The salary as it stands today | One month, as it was paid |
|---|
| Shows deductions | No | Yes: PF, ESI, tax and any recovery |
|---|
| Issued | When the employee asks | Every month, with the salary |
|---|
| Addressed to | A bank, an embassy or whoever asked | The employee |
|---|
A lender wants both because each covers the other's gap. The certificate can say the job exists and is permanent; only the slips show what's deducted. If your payslips are still made by hand, our salary slip generator makes one from the same breakup.
Who signs a salary certificate
Somebody with authority to bind the company: the proprietor, a partner, a director, or an HR or accounts head who's been authorised in writing. In Kavya's case it's Suresh, as proprietor. Don't let the employee's own manager sign it unless they hold that authority. Banks do phone the signatory now and then, and the person who answers has to be able to say yes, they signed it.
A salary certificate on company letterhead
Print it on the letterhead with the registered address, GSTIN or CIN if you have one, and a phone number that reaches the office. A plain sheet with a rubber stamp is exactly what a forged certificate looks like, and underwriters know it. Date it, give it a reference number from your own register, and keep a copy.
A bank loan letter from employer: say what you're not
Some banks send their own format for the employer to sign. Read it before it's signed. Some formats ask the employer to deduct EMIs from salary, to tell the bank before releasing a settlement, or to “confirm” that the employee's job is secure. Each of those is a promise, and a small business shouldn't make any of them for a staff member's personal loan. A letter from the employer should confirm the employment and the pay, and add that it's not a guarantee of any kind.
A salary certificate for visa application
The same certificate works for most visas, addressed to the embassy or “to whomsoever it may concern”. Embassies usually want two more facts: the dates of the approved leave for the trip, and a line that the job is held for the employee's return. Add both to the Word file before printing, and keep the leave dates matching the leave record, since that's what the consulate checks against the tickets.
