Take-Home Salary is the employee's gross pay after all required deductions have been taken out and accounted for. Read on to know how to use a salary calculator!
At the end of the month, an employer in any professional setting pays a predetermined sum to employees in exchange for their services. This sum is often specified in the employee’s contract and pay stub. There are various parts to the salary, and each one can differ between employers.
Since salary is a component of an employee’s yearly income, taxes must be paid on it. Consequently, the amount a business pays an employee differs from the amount that the employee receives in cash or takes home.
In this blog, we’ll explain how to use a salary calculator:
Different Components of Salary
An employee should be aware of the following common salary components:
Basic Salary
It is a component of the Cost to the Company (CTC) that employers pay to employees for services provided. Depending on the industry standards, the employee’s position, etc., it typically ranges from 40% to 50% of the employee’s overall salary.
Special allowances
This is a fixed amount that is added on top of the base pay and varies between companies.
Bonus
This is a fixed amount that is added on top of the base pay and varies between companies.
House rent allowance
Employees who reside in rented residences are compensated with HRA. It is typically calculated to be 50% of the basic pay for people who live in big cities. If an employee lives outside of a major city, the estimate is to be 40% of the base salary.
The HRA is partially or entirely deductible under Section 10(13A) of the Income Tax Act. Tax-exempt. The HRA will be subject to full taxation for people who do not reside in a leased home.
Leave travel allowance
This amount is paid to take care of the employee and his or her family’s holiday-related domestic travel expenses. This permission specifically includes flight and rail ticket costs. The LTA is eligible for tax exemption under the Income-tax Act.
Employee Provident Fund
This is a required savings scheme that must be offered by organisations that fit a specific size. Each employee’s EPF account receives an equal contribution from the firm.
Contributions made by employees are tax deductible for a maximum annual income of ₹1.5 lakhs. The involvement of the employer is not included in the salary but is considered a part of the CTC slip.
Professional tax
Every employee making a particular wage must pay this tax. to the state government must be paid. This sum cannot be more than ₹2,500 in one fiscal year.
Vakilsearch Salary Calculator
Although the salary breakdown provided above may seem easy to comprehend, many people find it complicated. Salary calculations may even include being more complex. Therefore, Vakilsearch offers a take-home salary pay calculator that can be used online.
The automated take-home salary calculator offered by Vakilsearch helps employees in calculating their net salaries post-tax. It accounts for all tax and salary components and also the deductions that apply.
How to Use Vakisearch Salary calculator?
To use a salary calculator these steps are to be followed,
- Choose whether you prefer the old or new tax system.
- Choose whether or not you reside in a metro area.
- Enter the full cost to the business (CTC)
- Enter the starting salary.
- Enter the monthly rent paid.
- Enter the monthly HRA provided by the employer.
- List the number of Section 80C investments made.
- Enter the sum you paid toward your health insurance premium.
- Provide the EPF amount per month, with the employer and employee contributions to be entered separately.
The calculator will begin working once the necessary information has been entered.
It will instantly display the following outcomes on the right-hand side:
- A pie chart representing the tax breakdown is shown.
- Take-home pay (monthly)
- Take-home pay (annual)
- Income tax
This is how one can use a salary calculator.
Formula to Calculate Take-Home Salary
An employee’s take-home pay is their net pay, that is left over after taking deductions from the gross salary. Here is an example of how to calculate the take-home pay. Let’s assume that an employee’s earnings and costs are as below:
CTC per annum = ₹10 lakhs
₹30,000 monthly for the basic salary
Each month, I pay ₹30,000 in rent.
HRA equals ₹15,000 a month
₹1.5 lakhs of rupees worth of investments for Section 80C
The monthly premium for medical insurance is ₹2000.
Employee and employer contributions together equal ₹1,800 for EPF
According to the old tax regime, a yearly income tax payment equals about ₹28,475
- As per the new tax regime, annual income tax equals roughly ₹78,000.
According to the previous tax system, the net yearly take-home pay would be as follows: = CTC – tax – EPF contribution = 10L – 28,475 – 21,600 = ₹9,49,924
- According to the new tax system, the net yearly take-home pay will be as follows: = CTC – tax – EPF contribution = 10L – 78,000 – 21,600 = ₹9,22,000
The take-home salary calculator by Vakilsearch also shows the monthly take-home pay amount in addition to the annual. Knowing how much money an employee will be available each month makes it easier for them to manage.
Conclusion
Most Indians prefer using the online take-home salary calculator because salary computations are usually tiresome. Vakilsearch Salary calculator provides the necessary wage information in a matter of seconds and without any mistakes. For proper results when using the calculator, users must make sure to enter the right values.
Did you know?
A lot of factors, such as the country, the employees, the company, etc., are taken into account when performing salary calculations.
FAQS
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What information is required to use the salary calculator?
If relevant, you should be aware of your annual gross salary before using the take-home salary calculator. If you enter additional details like HRA, rent paid, medical insurance premium, and EPF amounts, the calculator will produce precise figures.
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How is the income tax determined by the calculator?
The user-entered CTC and the tax regime are used by the calculator. It calculates the annual tax due based on the current Income tax slab rates using back-end operations.
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Which tax system, the new or the old, is better?
The slab rate is what distinguishes the previous and new taxation systems. In contrast to the old tax system, which allowed several deductions, no deductions are allowed under the new system. The decision between the two depends on one’s income structure, the appropriate deductions, and personal preferences.
Also Read:
- Can We Pay Income Tax Through Google Pay?
- How Can You Calculate The EPF Amount?
- How is Income Tax Calculated?
