What deductions can my employer legally make from my salary?

Question

My employer is deducting various amounts from my salary and I am not sure which deductions are legal and which are not. I have been reading conflicting things online and I would like to understand what Indian law actually says about this, which Act and Section applies, what the realistic timelines and costs are, and what I should be doing right now to protect my position. If the matter can be resolved without litigation I would prefer that route, but I want to know what my rights are before I agree to anything or sign any document.

MyVakeel Legal Desk · Accepted Answer

What deductions can my employer legally make from my salary? is governed in India primarily by Code on Wages 2019, Section 18, Code on Wages 2019, Section 19 and Payment of Wages Act 1936, Section 7. The short answer is set out below, followed by the practical steps most people in this situation need to take. Read it alongside the specific provisions named, because the exact relief available to you turns on the facts you can prove on paper.

Section 18 of the Code on Wages 2019 provides an exhaustive list of permissible deductions from wages, including fines, absence from duty, damage to goods entrusted to the employee, house accommodation, and recovery of advances, and deductions outside this list are unlawful.

Section 19 caps total deductions in any wage period at 50% of the total wages payable, so an employer cannot deduct more than half of an employee's wages in a single cycle even if multiple legitimate deductions apply together.

Fines can only be imposed under Section 18 after the employee has been given an opportunity to explain the alleged act or omission, and no fine can be recovered in instalments or after 90 days from the date it was imposed.

Deductions for damage or loss must be limited to the actual amount of the damage or loss caused by the employee's default and cannot be used as a punitive or arbitrary charge disguised as compensation.

Unauthorised deductions such as for resignation without notice beyond actual notice-pay shortfall, or arbitrary deductions for performance issues without a disciplinary process, can be challenged before the Payment of Wages Authority.

What to do next: 1) Obtain an itemised payslip showing every deduction made from your salary; 2) Cross-check each deduction against the permissible list under Section 18 of the Code on Wages; 3) Raise a written query with HR for any deduction that appears unauthorised or excessive; 4) File a claim before the Payment of Wages Authority for refund of unlawful deductions.

If the other side has already issued a notice, filed a case or set a deadline, treat the matter as time-sensitive — most remedies under Code on Wages 2019, Section 18 carry limitation periods, and a delay you cannot explain weakens an otherwise strong case. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in this practice area.