Have you ever thought of using the simplest way to calculate your salary? It may be hard to calculate the salary after the deductions and allowances provided by the company like House Rent Allowance, Leave Travel Allowance, Special allowance, Bonus, Contribution of the employee to the provident fund, professional tax? So, to make it easy and simple, a salary calculator is used.
A salary calculator is a tool that calculates the salary. The salary calculator has a formula, where you can enter the Cost to Company (CTC) and the bonus and such details. The salary calculator will display your deductions such as contributions to the employee provident fund, employee provident insurance, professional tax and calculate take home salary.
To calculate the in hand salary, one should enter the Cost to Company (CTC) and the bonus if there is any, as a fixed amount or percentage of the CTC.
|Cost to Company||5,00,000|
|(-)EPF Employer Contribution||21,600|
|(-)EPF Employee Contribution||21,600|
|Take Home Salary||4,24,400|
- For example, the Cost to Company (CTC) is Rs 5 lakh. The employee receives a bonus of Rs 30,000 for the respective financial year. So, the gross salary is Rs 5,00,000 – Rs 30,000= Rs 4,70,000. (The bonus is reduced from the Cost to Company).
- Gross salary = Rs 5,00,000 – Rs 30,000 = Rs 4,70,000.
- Then you can reduce the professional tax of Rs 2,400 a year (this may vary state to state).
- Next you can reduce the contributions of both employer and the employee towards the Employee Provident Fund (EPF).
- So, you have Rs 21,600 as a yearly contribution made by the employee towards the EPF and the same contribution of Rs 21,600 by the employer towards the EPF.
- Total deductions are Rs 2,400+Rs 21,600+Rs 21,600 which equals Rs. 45,600
- Take home salary is equal to gross pay minus total deductions
- Take home salary is equal to Rs 5,00,000 – Rs 45,600 = Rs 4,24,400.
- So, the take home salary calculator shows you the take home salary.
To use the Salary Calculator:
- You have to enter the yearly cost to the company or the CTC.
- Enter the bonus included in the CTC as a percentage or amount.
- The Salary Calculator will display you the total gross pay and also the performance bonus.
- It will also show the professional tax, employer provident fund, employee provident fund, employee insurance, and the take home salary.
Difference between Basic, Gross and Net Salary, and CTC
So, to know about the take home salary calculator India and the way it works let’s know about the basic salary, gross salary, differences between basic salary and gross salary, Cost to Company, net salary.
- The basic salary is the fixed or particular amount paid to employees for the work done by them. The basic salary is arrived at before any deductions or increments due to overtime, allowances, bonus are added. Basic salary remains the same, unlike the other aspects of Cost to Company. The total of the basic salary shall be part of the in-hand salary.
- Coming to the gross salary, it is the amount an employee has made working for the company in a year. It is the amount that does not include any deductions like income tax, professional fund, medical insurance etc. But it does include bonuses, holiday pay, overtime pay.
- Now Cost to Company (CTC), is the amount that a company uses directly or indirectly for hiring and retaining the services of an employee. In other words, Cost to Company is the total salary package provided to the employee. It indicates the total expense an employer spends on an employee in the period of one year.
The several components of CTC are as under:
|Direct Benefits||Basic salary|
|Direct Benefits||Conveyance allowance|
|Direct Benefits||Dearness allowance|
|Direct Benefits||House rent allowance|
|Direct Benefits||Medical allowance|
|Direct Benefits||Leave travel allowance|
|Direct Benefits||Vehicle allowance|
|Direct Benefits||Telephone or mobile phone allowance|
|Direct Benefits||Incentives or bonuses|
|Direct Benefits||Special allowance|
|Indirect Benefits||Food coupons|
|Indirect Benefits||Company leased accommodation|
|Indirect Benefits||Interest free loans|
|Indirect Benefits||Income tax savings|
|Indirect Benefits||Health and life insurances premiums paid by employer|
|Savings contributions||Superannuation benefits|
|Savings contributions||Employer provident fund|
- Now let’s know about the net salary. The net salary which is also referred to as take-home salary is the amount paid to the employee actually takes home after the deductions like taxes, provident fund, and others are done from it.
- Net salary = Gross salary – public provident fund – professional tax.
- Net Salary is generally less than gross salary. It can be equal when the income tax is 0 and when the amount paid to the employee is less than the government tax slab limits.
- When it comes to the differences between the gross salary and the net salary is as detailed.
- An employee’s gross salary includes the benefits such as HRA, conveyance allowance, medical allowance etc. Net salary = Gross salary – All the deductions like income tax, pension, professional tax, etc. Net salary is commonly called Take-home salary as well.
In hand Salary
Now let’s learn about in hand salary in India, In hand salary means ‘take home’ pay in India. ‘In hand’ is a word used commonly with a meaning of showing the net amount after all the deductions.
- In-Hand salary is equal to Monthly Gross Income – Income tax – Employee PF – Other deductions if any. The deductions could change from each company and are based on your Cost to company.
- Income tax, provident fund and professional tax are three important deductions from the salary of an employee over a month.
Calculation Of In Hand Salary From CTC:
- Calculate gross salary by deducting EPF and gratuity from CTC.
- Calculate taxable income by deducting necessary deductions from total income.
- Calculate income tax by adding respective slab rate on taxable income.
- Then calculate in hand salary.
Thus In hand salary can be calculated easily from cost to company.
Uses of Take home salary calculator:
- The salary calculator helps the employee in understanding his salary breakup and he can also take any kind of help from the human resource department in case of any doubt about the salary.
- It also tells the employee about his position in the company and it also helps him in knowing whether he is underpaid or not.
- The salary calculator can serve as a tool to the company when it plans to reduce human resource cost. It can be used to calculate salary and calculate compensations paid to the management and staff. Thus, helping us to know the areas of overpayment.
- It also reduces the work pressure on the human resource department and saves a lot of time.
Q: How do you calculate monthly take home salary through a salary calculator?
You can calculate take home salary by deducting income tax, employees provident fund, professional tax from gross salary.
Q: What is the difference between CTC and Take home salary?
CTC implies Cost to Company which includes all monetary and non monetary benefits spent on an employee by the company and take home salary is the salary the employee takes home after all deductions.
Q: How does the salary calculator arrive at gross salary of an employee?
Gross salary is calculated by subtracting performance bonus whether it’s fixed or percentage from the cost to company by a salary calculator.
Q: Is it easy to use a salary calculator?
It is an easy to use tool. You can use it comfortably at home and calculate take home salary in seconds.
Q: Does cost to company include provident fund ?
Cost to company includes all monetary and nonmonetary benefits incurred on a employee. It also includes provident fund.