Gross to Net Salary Calculator [India] 🇮🇳

Salaries in India are fixed payments employees receive for their work and are typically deposited at the end of every month. Although each company varies in structure and payments may differ accordingly, here are some of the more frequently encountered components that comprise an employee’s monthly compensation package:

1. Basic Salary: The basic salary represents 35-50% of gross pay and is fully taxable, providing the basis for other benefits such as Provident Fund (PF) contributions, bonuses and allowances. Usually determined based on role experience and industry norms
2. House Rent Allowance (HRA): HRA allows employees to cover housing costs. Employees living in rented accommodations may claim tax exemptions under Section 10(13A) of the Income Tax Act depending on certain criteria, such as rent amount and location (metro or non-metro cities). If an employee owns their home, however, HRA becomes fully taxable.
3. Leave Travel Allowance (LTA): LTA is offered to employees to cover travel expenses they incur during official leave. It is tax-exempt under the Income Tax Act provided certain criteria are met, and it is, therefore, an invaluable benefit for employees travelling during their time off. Essentially, it’s the ultimate perk.
4. Special Allowance: This allowance provides an additional payment above and beyond Basic Salary to cover personal or professional expenses that don’t count towards retirement benefits such as Pensionable Benefits (PF). Rather, this allowance is fully taxable.
5. Bonus: A bonus is an incentive awarded to employees based on their performance or company profitability, usually fully tax-deductible and may vary according to company policies. Bonuses serve as motivational tools by rewarding outstanding work performed.
6. Employee Provident Fund (EPF): EPF is a retirement savings scheme where both employer and employee contribute 12% of Basic Salary monthly into an accumulation account that can be accessed upon retirement. All contributions to EPFs are tax-deductible under Section 80C of the Income Tax Act.
7. Professional Tax (PT): Employers are required to deduct and remit Professional Tax on behalf of their employees, with a maximum annual cap of Rs2,500 depending on which state the tax falls in. Employers may collect this payment directly from employees as an administrative service fee or send in payments directly.

There are two sections to your salary slip. The first section is the income or earnings. The second section is about deductions.

Components such as basic salary, house rent allowance, special/other allowances, etc., are included in the income or earrings. This section also includes additional components such as Performance Bonus, Variable Pay, or Reimbursements.

Deductions include gratuity, employer and employee contributions to PF (Provident fund), professional tax, etc. Deductions include gratuity, employer contributions, employee contributions to the PF (Provident Fund), professional tax, etc.

These details can be overwhelming and intimidating for someone trying to figure out their salary. The salary calculator comes in handy here. The calculator will ask for your CTC as well as a few other basic details. Based on these inputs, it will calculate your take-home or in-hand salary.

In the next segments, we will explain the operation of the calculator in more detail. Let’s first understand the main salary components.

To calculate your take-home pay, you will need to enter the cost to the company and any bonus as either a fixed amount or a percentage.

Cost to Company (CTC), for example, is Rs 8 lakh. Your employer awards you a bonus for the year of Rs 50,000. Your total gross salary will be Rs 8,00,000. – Rs 50,000. = Rs 7,50,000. (The bonus is subtracted from the cost to company).

Gross salary = Rs 8,00,000. – Rs 50,000 = 7,50,000.

• A professional tax of Rs 2400 per year is deducted from the gross salary (this is a professional tax in Karnataka). Then, it deducts both your employer’s and your contributions to the Employee Provident Fund (EPF).
• The EPF contribution is calculated based on a monthly salary cap of Rs 15,000. This translates into 12% of Rs 15,000, which is Rs 1,800 per month or Rs 21,600 annually.
• You have an employee contribution of Rs 21600 per year and an employer contribution of Rs 21600. (8.33% is diverted from the employer contribution to the employee pension plan). You also have an annual deduction of Rs 3,000 for employee insurance.
• Total deductions = professional tax + EPF Contribution (Employee Contribution) plus EPF Contribution (Employer Contribution).

Total deductions = Rs 2400 + Rs 21600 + Rs 21600 + R 3,000 = Rs 48 600.

Take home pay = Gross pay – Total deductions

Take home Salary = Rs 7,50,000-Rs 48,600 = Rs 7,01,400

Take Home Salary = Gross Salary – Income Tax – Employee’s PF Contribution – Professional Tax

Gross salary = Cost to Company (CTC) – Employer’s PF Contribution – Gratuity

Gratuity = (Basic Salary + Dearness Allowance) × 15/26 × Years of Service

Taxable income = Gross Salary – Employee’s PF Contribution – PPF Investment – Tax-Free Allowances – HRA – LTA – Medical Insurance – Tax Saving Investments – Other Deductions

Suppose an employee’s income and expenses are as below:

Annual CTC = Rs. 10 lakhs

Basic salary = Rs. 30,000 per month

Rent paid = Rs. 30,000 per month

HRA = Rs. 15,000 per month

Investments towards Section 80C = Rs. 1.5 lakhs

Medical insurance premium = Rs. 2,000 per month

EPF = Rs. 1,800 each of employee and employer contribution per month

Annual income tax = approximately Rs. 28,475 as per old tax regime

Annual income tax = approximately Rs. 78,000 as per new tax regime

The net annual take-home salary as per old tax regime will, therefore, be:

= CTC – tax – EPF contribution

= 10L – 28,475 – 21,600

= Rs. 9,49,924

The net annual take-home salary as per new tax regime will, therefore, be:

= CTC – tax – EPF contribution

= 10L – 78,000 – 21,600

= Rs. 9,22,000