Take-home salary is the total salary that you receive after various deductions. A take-home salary calculator provides a detailed picture of various deductions and shows the actual salary you get at the end of the month. Read on to know how to use a take-home salary calculator and know your in-hand salary.
To calculate take-home salary with any online salary calculator, you can follow these steps:
Open an online take-home salary calculator.
Enter your CTC or Cost to Company in the relevant box.
Now, put the bonus that is included in your CTC either in value or in percentage.
The calculator will now display your total gross pay along with your performance bonus. It will also show the employer PF, employee PF, professional tax, employee insurance and your take-home salary.
To understand how a take-home salary calculator works, let’s take an example for a better understanding:
For instance, your CTC (Cost to Company) is Rs. 7.5 lakh and you do not receive any bonus Rs. from your employer during a financial year. So, your gross salary will be Rs 7.5 lakh.
Now, let’s say the professional tax deducted by your state government is Rs. 2,400 in a year. In addition, there is an EPF contribution of 12% from the basic salary by both the employee and the employer.
EPF is calculated at a maximum salary of Rs. 15,000 a month. So, 12% of Rs. 15,000 would be Rs. 1,800 per month. Thus, your EPF contribution would stand at Rs. 21,600 each year. Similarly, your employer will also make a contribution of Rs. 21,600 towards EPF. Moreover, there is an annual deduction of Rs. 3,000 per year that will go towards employee insurance.
So, total deductions would stand at:
Professional tax + Employee insurance + EPF (both employee and employer)
= Rs. 2,400+ Rs. 3,000 + Rs. 21,600 + Rs. 21,600
= Rs. 48,600
Thus, your take-home salary would be Rs 7,01,400 (Rs. 7,50,000- Rs. 48,600).
Also read: Standard Deduction For Salaried Employees
A salary consists of different components. These components usually include the following:
Your basic salary is generally around 40% to 50% of your total salary. The basic salary will always be a fixed component of your CTC (Cost to Company).
This component of the salary is provided by the employer to those employees who live in rented accommodation. The HRA is exempted from income tax under Section 10(13A). However, this exemption won’t be available if you do not live in a rented place.
Your employer provides a certain allowance for travel expenses. You need to furnish the necessary proof to receive this allowance. As a salaried individual, you can seek LTA exemption under Section 10(5) of the IT Act.
You might also receive a performance incentive, also known as a bonus. This is a part of your CTC and can be fully taxable
This particular component of your salary is also taxable.
Both you and your employer make a contribution of 12% of the basic salary towards the Employees’ Provident Fund each month. You can avail tax deductions for the contribution you make towards EPF under Section 80C of the Income Tax Act.
Professional tax is a special tax that is levied on your employment by the state. The state may impose a maximum of Rs. 2,500 as professional tax in one financial year.
Also read: How To Use Online Income Tax Calculator?
Here are some of the top benefits of an online take-home calculator:
You should remember that the variables (incentives, bonuses, and others) are paid on a quarterly basis. So, you would not receive the same take-home salary each month. Your take-home salary will be more than the calculated amount in the months you receive variable pay. Use a take-home salary calculator to find out your in-hand pay every month.
The income tax that you will have to pay will depend on the tax slab that you belong to. There is a basic exemption limit of Rs. 2,50,000. If your yearly income is below the basic minimum, you do not have to pay income tax.
Your salary is made of various components. Some of these components include house rent allowance, travel allowance, special allowance, bonus and more. Among them, components such as house rent allowance, leave travel allowance are exempted from taxation. You can claim exemption on these components of your salary while paying income tax.
A basic salary is the fixed component of your salary that your employer pays for the work you do. Basic salary is determined before making any deductions or adding any allowances or bonuses. Gross salary does not include deductions such as professional tax, insurance or others. But it includes bonuses, overtime incentives, etc.
CTC is the total salary package that an employee gets. It is the amount that your employer spends directly or indirectly for hiring you.
Some of the CTC components that qualify as direct benefits include dearness allowance, house rent allowance, bonuses or incentives, special allowance, leave travel allowance and more. Indirect benefits include interest-free loans, company accommodations, health insurance premiums paid by employers and others.
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
Public Provident Fund (PPF) – Know PPF Details and Its Benefits
In 1968, the National Savings Institute introduced the PPF scheme. The Public Provident Fund (PPF) ... Read More »How to Withdraw PF Amount? – Step-by-Step Guide
EPF (Employees Provident Fund) is a popular savings scheme for employees in India. The Central Gove... Read More »Previous Year in Income Tax: Exceptions on Taxation
‘Previous Year’ in the Income Tax Act, 1961 is an important concept associated with the payment... Read More »What are Capital Receipts and What are its Types?
The concept of a receipt is easy to understand as it is described as a written record that a paymen... Read More »What is Anti-Dumping Duty (ADD) – Its Working, Examples and Calculation
Anti-dumping duty refers to a tax or other charges levied on a particular imported product. The con... Read More »Loan to Purchase Land – Types, Features, Eligibility and Documents Required
Loans for land purchase or plot loans are secured loans given for purchasing plots of land. Borrowe... Read More »List of 11 Tax-Free Income Sources in India (2023)
There are many sources through which a person can earn his/her income. It can be income from salary... Read More »New GST Rates in India (2023) – Latest Changes in GST Rates
GST or the Goods and Services Tax is one of the most significant tax reforms to be ushered in since... Read More »What is Input Tax Credit (ITC) in GST – Eligibility and Documents Required To Claim ITC
GST is consumption-based taxation levied at all stages in a value chain. Set-off of GST paid in the... Read More »What is Cess on Income Tax: Overview, Types and Calculation
Cess is a tax on taxes imposed by the Central Government or state governments for specific reasons.... Read More »Section 80EEB: Eligibility & Deduction Amount
Electric vehicles are better for the environment and an efficient alternative to fuel-run vehicles.... Read More »What is Section 80GGA: Deductions on Donations Made for Rural Development
Income Tax Act provides several opportunities for taxpayers to claim partial or full deductions. Se... Read More »Top 10 Chit Fund Schemes in India in 2023
Chit funds are one of the most popular return-generating saving schemes in India. It is a financial... Read More »10 Best Gold ETFs to Invest in India in February 2023
Gold ETFs or Gold Exchange Traded Funds are passively managed funds that track the price of physica... Read More »Top 10 Demat Accounts in India [Lowest Brokerage Charges]
A Demat account was created to eliminate the time-consuming and inconvenient procedure of purchasin... Read More »20 Best Index Funds in India to Invest in 2023 (Updated on 31st Jan)
What is an Index Fund? An index fund is a type of mutual fund or exchange-traded fund (ETF) that... Read More »Best Arbitrage Mutual Funds to Invest in India: Returns and Taxation
Arbitrage funds are hybrid mutual fund schemes that aim to make low-risk profits by buying and sell... Read More »Best SIP Mutual Funds To Invest In India (2023) – Its Types And Taxation
A Systematic Investment Plan (SIP) is a convenient way to invest a fixed sum in mutual funds. For i... Read More »10 Best Corporate Bond Funds in India 2023 – With Returns
Corporate bond funds are debt funds that invest at least 80% of the investment corpus in companies ... Read More »10 Best Banks for Savings Account in India (2023)
A savings account keeps your money safe, and lets you earn interest every quarter. There are many b... Read More »All information is subject to specific conditions | © 2023 Navi Technologies Ltd. All rights are reserved.
Start Small. Dream Big.
Start your Investment Journey with just ₹10