Salary Increment Letter Format with Revised CTC

A salary increment letter informs an employee of a raise in pay, usually after the annual appraisal or on confirmation. It states the current and revised CTC, the date the new salary takes effect and whether arrears are due, with the new component break-up in an annexure. It changes only pay; the designation, role and other terms stay as they were. For a raise that comes with a new title, use a promotion letter instead.

When to use it: Issue it after the appraisal cycle is closed and the revised salary is approved by the budget owner and finance, ideally before the payroll month in which the new salary first applies. HR prepares it for signature by the HR head or a director. The employee countersigns the office copy to confirm receipt.

Salary increment letter template

Copy the text below and replace everything in square brackets with your company details.

[Company Name]
[Office Address]
[City], [State] [PIN Code]

Date: [Date]
Ref: [Company Code]/HR/INC/[Year]/[Number]

Strictly private and confidential

To
[Employee Name]
[Designation], [Department]
Employee ID: [Employee ID]

Subject: Revision of your salary

Dear [Employee Name],

In recognition of your contribution during [Review Period, for example: April 2025 to March 2026] and based on the annual performance review, we are pleased to revise your salary with effect from [Effective Date].

Current annual CTC: ₹[Current CTC]
Revised annual CTC: ₹[Revised CTC] (Rupees [Amount in Words] only)
Increase: ₹[Increase Amount] a year, that is [Percentage] percent
Revised monthly gross salary: ₹[Monthly Gross]

The revised component-wise break-up is given in the annexure to this letter. [As the revision takes effect from [Effective Date], the difference for the months already paid will be paid as arrears with your salary for [Payroll Month]. / Or delete this sentence if there are no arrears.]

This revision reflects your performance and the company's pay review for the year. It does not create any commitment about future revisions, which will depend on your performance and the company's results. Your designation, reporting and all other terms of your appointment remain unchanged.

Salary information is personal and confidential. Please do not discuss your revised salary with colleagues.

We appreciate your work and look forward to your continued contribution.

Yours sincerely,
For [Company Name]

[Signatory Name]
[Signatory Designation]

Enclosure: Annexure, revised salary break-up

Acknowledgement

I acknowledge receipt of this letter and the revised salary annexure.

Name: [Employee Name]
Signature: ____________
Date: ____________

What to include

Old and new CTC side by side

Show both figures, the increase in rupees and the percentage. Employees check the arithmetic, and a letter that shows it plainly prevents confusion between CTC and in-hand pay.

Effective date and arrears

When the increment is effective from an earlier month, say so and name the payroll month in which arrears will be paid. Payroll must receive the same date, or the letter and payslip will disagree.

A structure that meets the wage rule

Rebuild the annexure so basic pay plus DA stays at least half of total remuneration, as the Code on Wages requires. Allowances above that line are added back to wages, which changes PF, gratuity and bonus. The salary calculator helps check take-home pay.

No promise of future raises

One sentence that future revisions depend on performance and results keeps this year's increment from being read as a yearly entitlement.

Confidential delivery

Mark the letter confidential and hand it over or email it individually. Group emails or shared folders leak salary data and cause avoidable resentment.

Common mistakes to avoid

Stating only the percentage, so the employee cannot see the new CTC or monthly gross.
Giving an effective date that payroll does not know about, leading to missing arrears.
Raising allowances alone so that basic plus DA falls below half of total pay.
Issuing the letter after the revised salary is already credited, with no explanation.
Sending increment letters for a whole team in one email.

Run it in ZeniaHR

Record the new monthly gross as a salary revision on the employee's record; Direct Payroll splits it into Basic, DA, HRA and Special by the company's percentages or salary components, and the employee record keeps the revision history. Add any arrears as a payroll input earning for the month they are paid, so they appear as a separate line on the payslip. Salary fields can be masked by role in access control. Store the acknowledged letter in the employee's documents alongside the revision.

Payroll Performance Employee documents

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Frequently asked questions

What should a salary increment letter include?

It should include the current and revised annual CTC, the increase in rupees and percentage, the revised monthly gross, the effective date, how any arrears will be paid, and an annexure with the new salary break-up. Add a line that other terms of employment are unchanged, and mark the letter confidential.

What is the difference between an increment letter and a promotion letter?

An increment letter changes pay only; the designation and role stay the same. A promotion letter moves the employee to a higher designation or grade with new responsibilities, and usually includes a pay revision too. If the title changes, issue a promotion letter even if the increase is small.

How are increment arrears paid?

When an increment takes effect from a month already paid, the difference for those months is paid as arrears, usually with the next salary. The letter should name the payroll month. Arrears appear as a separate earning on the payslip, and PF and other deductions apply to them as they do to wages.

Can an employee refuse a salary increment?

An employee rarely refuses a raise, but may question the amount. If the increment comes with a changed structure, for example lower allowances, explain it in a meeting before issuing the letter. Any change that reduces a component should be agreed in writing, even when the total goes up.