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Salary Calculator

A salary calculator is a very easy tool to use which helps in determining the total annual deductions, take-home annual salary, and total monthly deductions of an individual. This inhand salary calculator uses some basic components such as the  basic salary, House Rent Allowance, Leave Travel Allowance, Professional Tax, Bonus, Special Allowance, Employee contribution to provident fund etc to calculate the salary.

Salary Breakdown

Total Monthly Deductions

Total Annual Deductions

Take Home Annual Salary

Take Home Monthly Salary

What is Salary, and What are the Components of a Salary Structure?

A salary is a form of payment to an employee, typically paid regularly, such as monthly or bi-weekly, for the services they provide to their employer. Salaries are typically calculated as a fixed amount rather than based on the number of days worked or the amount of work completed. Some employees may receive additional benefits and incentives, such as health insurance, retirement plans, or stock options, in addition to their salary. The amount of a salary can vary greatly depending on the type of job, the industry, the location, and an individual's experience and education level.

The major components of a salary are given below:

  • Basic Salary
  • House Rent Allowance (HRA)
  • Dearness Allowance (DA)
  • Travel Allowance (TA)
  • Medical Allowance
  • Special Allowance
  • Provident Fund (PF)
  • Gratuity
  components-of-salary-structure

What is a Salary Calculator?

A salary calculator is a tool that allows individuals to calculate their estimated annual or monthly salary based on the information they input, such as the number of days worked, the rate of pay, and any bonuses or deductions. It can also factor in taxes and benefits to provide a more accurate net pay estimate. Salary calculators can be found online, and some employers use them to determine an employee's compensation package.

How Does Inhand Salary Calculator Work?

The salary calculator considers various factors such as basic salary, house rent allowance (HRA), conveyance allowance, medical allowance, and other deductions such as tax and Provident Fund (PF). Here's an example of how the salary calculator works:

Suppose an individual earns a basic salary of INR 30,000 per month.

Step 1: Calculate HRA - If the HRA received is 50% of the basic salary, then the HRA would be 30,000 x 50% = INR 15,000.

Step 2: Calculate Conveyance Allowance - If the conveyance allowance received is INR 2,000, then the total conveyance allowance would be INR 2,000.

Step 3: Calculate Medical Allowance - If the medical allowance received is INR 2,000, then the total medical allowance would be INR 2,000.

Step 4: Add up all the allowances - Adding up the basic salary, HRA, conveyance allowance, and medical allowance, the gross salary would be 30,000 + 15,000 + 2,000 + 2,000 = INR 49,000

Step 5: Calculate Deductions - The next step is to calculate the deductions such as tax and PF.

  • Tax Deduction: If the tax rate is 10%, then the tax would be 49,000 x 10% = INR 4,900
  • Provident Fund (PF) Deduction: If the PF rate is 12%, then the PF would be 49,000 x 12% = INR 5,880

Step 6: Calculate Net Salary - Finally, subtracting the total deductions from the gross salary, the net salary would be 49,000 - 4,900 - 5,880 = INR 38,220

What is the Difference Between CTC & Take Home / Inhand Salary?

The table below shows the major difference between a CTC and a take-home salary:

CTC  Take-Home / Inhand Salary
CTC stands for Cost to Company, the total amount an organisation pays for an employee's salary. Take-Home or Inhand Salary, on the other hand, is the amount an employee receives after deducting all the taxes and other deductions from the CTC.
It includes all costs the employer pays the employees, including base salary, bonuses, provident fund, medical insurance, gratuity, and other benefits. It is the amount that the employee can use for personal expenses, savings, and investments.
CTC is the total cost incurred by the company to employ a person. Take Home Salary is the amount an employee receives after all the deductions.

What is the Formula for Salary Calculation?

The formula for calculating salary in India is as follows:

  • Gross Salary = Basic Salary + House Rent Allowance (HRA) + Dearness Allowance (DA) + Other Allowances
  • Net Salary = Gross Salary - (Professional Tax + Income Tax + Other Deductions)

Factors Affecting The Formula For Calculating Salaries

The following factors affect the formula for calculating salaries:

  • Experience: Years of experience in the field can also affect an employee's salary. Those with more experience and greater expertise in their field may be compensated with higher wages. 
  • Industry: The industry an employee is working in can significantly impact their salary. Different sectors may offer different wages depending on the skills and experience required. 
  • Location: Location also plays a role in salary calculations. Employees in certain cities or regions may be paid more due to the cost of living or availability of certain jobs. 
  • Company Size: The organisational size can also affect an employee's salary. Larger companies typically have more resources and may be able to offer higher salaries. 
  • Job Title: The title of an employee's job can also affect their salary. Those with higher levels of responsibility may be compensated with a higher salary. 
  • Benefits: Health insurance, vacation time, and other perks can also affect an employee's salary. Companies may offer additional compensation in exchange for these benefits.

Benefits of Salary Calculators

Salary calculators can offer several benefits, including:

  • Accurate Salary Estimates: Salary calculators use complex algorithms and current market data to provide employees and job seekers with accurate salary estimates for a given job or occupation.
  • Time-Saving: Rather than spending hours researching salary information, salary calculators allow users to quickly and easily determine what they can expect to earn in a particular job or industry.
  • Customisable: Many salary calculators allow users to input specific details about their education, experience, location, and other factors that can impact their earnings. This provides a more customised and accurate estimate.
  • Easy Comparison: With salary calculators, users can compare the salaries of different jobs and industries, allowing them to make informed decisions about their career choices.
  • Negotiating Tool: By providing employees and job seekers with accurate salary information, salary calculators can be valuable when negotiating salary during the job search or performance review process.
  • Up-to-date Information: Salary calculators use real-time data, ensuring that the information they provide is up-to-date and relevant.
  • Accessibility: Salary calculators are widely available online and often free to use, making it easy for anyone to determine their earning potential.

Calculating Gross & In-hand Salary

To compute Gross and In-hand Salary, you can rely on Urban Money's Inhand Salary Calculator. However, to calculate the values manually, utilise the given formula.

  • Gross Salary: Gross salary is the total amount of money an employee receives before any deductions are made. It includes wages, bonuses, and any other sources of income. To calculate gross salary, employers must add any bonuses or commissions to the regular wages for the employee.
  • Formula: Gross Salary = Basic Salary + Dearness Allowance + House Rent Allowance + Any Other Allowances. 

Example:

Suppose an employee's basic salary is INR 20,000 per month, and he receives a dearness allowance of INR 5,000 per month, a house rent allowance of INR 3,000 per month, and a medical allowance of INR 2,000 per month.

Gross Salary = INR 20,000 + INR 5,000 + INR 3,000 + INR 2,000 

Gross Salary = INR 30,000 per month 

  • In-hand Salary: Inhand salary is the amount of money an employee receives after all the deductions, such as income tax, provident fund, professional tax, etc., have been made. 
  • Formula: In-hand Salary = Gross Salary – Deductions 

Example:

Suppose an employee's gross salary is INR 30,000 per month, they pay a professional tax of INR 200 per month, and his contribution to the provident fund is 12% of his basic salary.

  • In-hand Salary = INR 30,000 – INR 200 – (12% of INR 20,000)
  • In-hand Salary = INR 26,800 per month

Calculate Your Income Tax Online

Few Salary Terminologies You Need to Know

To understand the basic salary structure, get acquainted with the following salary terminologies:

  • Gross Salary: Total salary before deductions such as taxes, insurance, etc. 
  • Basic Salary: Fixed component of salary which is exempt from deductions. 
  • CTC (Cost to Company): The total amount an employer spends on an employee, including salary, benefits, and other costs. 
  • Incentives: Additional monetary rewards for meeting performance targets or exhibiting exemplary behaviour. 
  • Provident Fund (PF): A mandatory retirement savings scheme where employees and employers contribute a certain percentage of the employee's salary towards a fund. 
  • Gratuity: A lump sum benefit paid to an employee upon retirement or termination. 
  • Reimbursements: Payment made by the employer to cover expenses incurred by the employee during work-related activities.
  • HRA (House Rent Allowance): This is an allowance to help employees pay their rent. It is a percentage of the employee's salary and is tax-exempt. 
  • Special Allowance: These are additional payments made to employees for specific purposes, such as travel or medical expenses. They are not part of the basic salary and are taxable. 
  • Bonus: This is an additional payment made to employees for meeting specific goals or achieving certain targets. It is usually a percentage of the employee's salary and is taxable.

Frequently Asked Questions (FAQs)

How much is the Basic Salary of a CTC?

Generally, about 40-50% of the CTC is considered for the basic pay. Further elements of the CTC make up the rest of the portion.

Does CTC include PF?

Provident Fund (PF) is included in the Cost to the Company (CTC) for employees in India. CTC is a company’s total cost for an employee, including the salary, bonuses, benefits, and all the statutory deductions such as PF, Employee State Insurance (ESI), and tax.

What is HRA? How much tax is exempted from HRA?

HRA is Home Rent Allowance which companies offer their employees as reimbursement for meeting their rental expenses.

How much contribution is mandatory from an employer towards the Employees Provident Fund (EPF)?

An employer contributes 12% towards an employee’s Provident Fund. This includes dearness allowance, retaining allowance, and basic pay.

How is CTC calculated in salary?

Generally, a CTC is the sum of basic pay and all employee benefits. For example, if an employee gets a basic pay of INR 10,000 and additional allowances worth INR 5000, then the CTC will be the total of both, i.e. INR 15,000.

How do taxes and benefits impact my take-home pay?

If an employee’s salary comes under the tax slabs, there will be a TDS deduction, after which the remaining amount is what the employee takes home.

What are the factors that affect my salary?

Several factors can affect your salary, including your level of education, work experience, skills and abilities, job performance, location, company size, and industry, as well as the current job market and demand for your job role.

What is the net salary if CTC is 5 lakh?

The net salary that an employee can take home for an annual CTC of INR 5 Lakh depends on the breakdown of the basic pay and the other benefits the employee is getting. Also, additional TDS will be applicable as per the tax slab.

How much is 10 LPA in-hand salary?

The net in-hand salary for an INR 10 Lakh per annual package will depend on the CTC breakdown. The CTC always includes basic pay and other allowances in varied percentages. Furthermore, the employee will have to pay the applicable taxes as per the income tax slab.