What is Salary?
Your salary offer is usually given as a CTC, or Cost to Company: the total amount your employer spends on you in a year. It includes your basic pay and allowances, but also things you don’t receive in your bank account every month, such as the employer’s PF contribution and your bonus.
Your take-home or in-hand salary is what actually reaches your bank account after these are taken out, along with deductions like your own PF contribution and professional tax.
That’s why your monthly take-home is always less than your CTC divided by 12.
Good to know
Your PF contributions aren’t lost: both yours and your employer’s go into your EPF account and earn interest until you retire.
What is a Salary Calculator?
A salary calculator works out your monthly and yearly take-home salary from your CTC, by taking out your bonus, PF contributions, professional tax and any other deductions.
The result is before income tax. Income tax (TDS) is also deducted from your salary every month, depending on your income and the tax regime you choose.
Why you should use a Salary Calculator?
- Understand a job offer: See what a CTC will actually give you every month before you accept.
- Plan your budget: Know your real monthly income, so you can plan your spending and savings.
- Compare offers: Two offers with the same CTC can give different take-home pay. Compare them fairly.
How Does a Salary Calculator Work?
The salary calculator works on the following inputs:
- Cost to Company (CTC): Your total yearly CTC.
- Bonus Included in CTC: Any yearly or performance bonus that is part of your CTC. It is paid separately, not every month.
- Monthly Professional Tax: A small state tax on employment, usually up to ₹200 a month. Some states don’t charge it.
- Monthly Employer and Employee PF: Your employer’s and your own PF contributions, usually 12% of your basic salary each.
- Additional Deductions: Anything else deducted every month, such as health insurance or a meal card.
The calculator relies on the following formulas:
Total Annual Deductions = Bonus + 12 × (Professional Tax + Employer PF + Employee PF + Additional Deductions)
Net Take Home Annual = CTC − Total Annual Deductions
Calculating Salary with an Example
Consider an example for a better understanding.
- CTC: ₹6,00,000
- Bonus: ₹50,000
- Professional Tax: ₹200 a month
- Employer PF and Employee PF: ₹1,800 a month each
Total Annual Deductions = 50,000 + 12 × (200 + 1,800 + 1,800) = ₹95,600
Net Take Home Annual = 6,00,000 − 95,600 = ₹5,04,400
So your take-home salary is ₹5,04,400 a year, or about ₹42,033 a month, before income tax. Your ₹50,000 bonus is paid separately.
Things to keep in mind
- Income tax: Income tax is deducted from your salary too. Use our Income Tax calculator to see how much, under each regime.
- Gratuity: Some employers include gratuity in your CTC. You only receive it after 5 years of service, so add it as an additional deduction if it’s in yours.
- Variable pay: If part of your CTC depends on performance, the amount you actually get may be lower than shown.