Take Home Salary Calculator

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What is Salary?

When you are working for an organisation as an employee, then your employer makes regular monthly payments to you for the work done, which is referred to as the salary. The basic components in the salary structure in India include:

  • Basic Salary - The basic salary is a fixed component of your CTC (Cost to Company) package and will be around 40%-50% of your total salary. You will be paid for your skill, experience and qualifications.
  • House Rent Allowance (HRA) - HRA component of the salary will be offered by the employer if residing in rented accommodation. The HRA is partially or fully exempted from taxes under Section 10(13A) of the Income Tax Act. But if you are not living in any rented accommodation, then HRA is fully taxable.
  • Leave Travel Allowance (LTA) - Your employer will provide you with an allowance for travel expenses called the leave travel allowance. For this, you must submit proof of travel to claim the allowance. As a salaried employee, you will be eligible to claim the LTA exemption under Section 10(5) of the Income Tax Act.
  • Special Allowance - Special allowance component in your salary is fully taxable.
  • Dearness Allowance (DA) - Dearness allowance is a certain percentage of your salary paid to help you cope with the rising costs of living. Since the cost of living depends on factors such as location, the DA component can vary depending on the location. For salaried employees, the DA component is fully taxable.
  • Bonus - Your employer will pay a performance incentive called the bonus. It is a part of your gross salary and is fully taxable.
  • Employee contribution to the provident fund (EPF) - Both you and your employer contribute 12% of your (employee) basic salary every month to the employee provident fund (EPF). This contribution towards the EPF is available for a deduction under Section 80C of the Income Tax Act, 1961.
  • Professional Tax - This tax is levied on you by the state and varies across the states. They can charge around INR 2500 as a professional tax in a financial year.
  • Gratuity - A sum of money paid by the employer to you (employee) under the Payment of Gratuity Act of 1972 is called gratuity. After a set term of service, usually five years, when you want to leave your employer, Gratuity is paid as a token of appreciation by your employer for the long service you have provided for the organisation.
  • Insurance - Employers usually provide you (employee) with health and life insurance. Every month, a small amount is deducted from your salary for insurance. The CTC also includes the insurance premium.
  • Income Tax - Your employer deducts a tax amount from your salary based on the tax slab and tax rate. This deduction is done before your salary is processed, hence, this is referred to as tax deducted at source (TDS). You will be provided with Form 16 to share the details of the tax deduction.

What is a Net Salary Calculator?

The salary calculator is a model that calculates your take-home salary. It is the total salary that you get after all the necessary deductions are done. The salary calculator consists of a formula box, wherein details such as CTC and the bonus that is included in the CTC.

The salary calculator will also provide you with information regarding the deductions such as the employer and employee provident fund, your professional tax, employee insurance and your take-home salary.

How Do Salary Calculators Work?

To calculate the take-home salary in India, you must enter the details of CTC and the bonus, if available in the form of a fixed amount or as a percentage of the CTC.

For example, if your CTC is INR 9 lakh and your employer gives you a bonus of INR 50,000 for the financial year. Then, your total gross salary will be equal to INR 9,00,000 - INR 50,000 = INR 8,50,000. Here, the bonus is deducted from the CTC.

Hence, the total Gross salary = INR 9,00,000 - INR 50,000 = INR 8,50,000.

From the gross salary, the professional tax will also get deducted. For example, if the professional tax for INR 2,400 a year (professional tax in Telangana). It then deducts the contributions of both yours and your employers towards the EPF.

EPF contribution is computed against a maximum salary of INR 15,000 every month. This translates to 12% of INR 15,000 which equals INR 1,800 per month or INR 21,600 per year.

So, now you have INR 21,600 as a yearly EPF contribution made by you and your employer. 8.33% of your contribution gets diverted to the pension employee scheme.

Hence, in addition, you will also have a yearly deduction of INR 3,000 towards employee insurance.

So, the total deductions = Professional tax + EPF (Employee contribution) + EPF (Employer contribution) + Employee insurance

Total deductions = INR 2,400 + INR 21,600 + INR 21,600 + INR 3,000 = INR 48,600.

Take-Home Salary = Gross pay - Total deductions

Take Home Salary = INR 8,50,000 - INR 48,600 = INR 8,01,400.

Monthly take-home salary = INR 8,01,400 /12 = INR 66,783.

Salary Hike Tips

  • Education - Considering your average lifetime earnings, the level of education has a very important role to play. Having relevant knowledge or expertise in a particular niche or industry can help increase your salary. This involves staying up-to-date on current events within your expertise by attending relevant conferences or spending time reading on the subject.
  • Experience - The more experienced you are within your industry, the more likely your salary will increase over the years. This is applicable when you stay in the same industry. Your experience is proof providing sufficient evidence which determines that you are skilled in the area. Employers consider this as a good sign and may willingly increase your salary.
  • Negotiate - When you are trying for a new job, you can always negotiate for a higher salary. Here, you can highlight any valuable achievements, and past performances when you might warrant a raise.
  • Performance reviews - Your (employee) annual performance will also define your pay raise. If the reviews provided by your employer are positive, then the pay rise would likely be on the higher end. The performance review usually involves a discussion between you and your manager/employer on the entire last year’s projects that you have undertaken, work initiatives that are taken, and your achievements.
  • Change jobs - If there seems no option to hike your salary, then you may consider changing your job, as this may give you a considerable hike.

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The total amount of HRA that you (employee) receive is not always tax-free. Tax exemption is usually done for:
  • Amount of HRA received from the employer.
  • Actual rent is paid minus 10% of your salary.
  • 50% of your basic salary if you are living in metro cities, or 40% of the basic salary if you are living in non-metro cities.
Cost-to-Company (CTC) is the overall cost of providing employment and maintaining an employee. It includes your salary + employer-paid benefits (provident fund contribution, rental allowance, health insurance, and other allowances).
Sometimes, based on the organisation you have joined, your CTC also includes cab services and food coupons. Hence, CTC is your employer’s complete cost to retain you. The total sum again varies from one organisation to another. The CTC also affects your take-home salary.
Gross salary, on the other hand, is the amount that is left after deducting your gratuity and EPF from the CTC. Your gross salary is always more than your take-home salary as it includes bonuses, overtime pay and other employer-provided incentives.
In-hand salary means ‘take home’ pay in India. This word is used in daily life circumstances to mean the final amount that is received after all the deductions of taxes are done.
Income tax, professional tax, and provident fund are the three main components that are deducted from your monthly salary.
Take-home salary or in-hand salary is the net salary that is obtained after deducting income tax (TDS) and other deductions, from the gross monthly pay.