Salary Calculator - Overview

In any professional setting, an employer pays employees a predetermined sum for their services at the end of each month. Salary is the conventional name for this payment. Usually, this sum is specified in the employee's contract and pay stub. Each of the numerous components of the pay can differ between employers. An employee must pay taxes on salary because it is a part of their yearly revenue. As a result, the amount a company pays an employee differs from the amount that employee really receives or keeps for themselves.

Here, we'll talk about in hand salary calculator and how Vakilsearch's salary calculator online can make it simple for employees to estimate their take-home pay.

The following are some typical pay components of a salary that every employee should be aware of before using the salary calculator online

Basic Wage

It is a component of the salary that employers pay to employees for services provided. Depending on the industry norms, the employee's position, etc., This usually is around 50% of the overall income.

Special Permission

This is a fixed amount that is paid on top of the base pay and varies from company to company.

Bonus

Bonus is given as compensation for good work and is included in an employee's gross salary.

Housing Rent Allowance(HRA)

Employees who rent a place to reside receive this. It is typically calculated to be 50% of the basic pay for people who live in big cities. It is expected that for workers who live in non-metropolitan areas, the amount will be 40% of their basic pay. This amount is partially or completely free from taxation as per Section 10(13A) of the Income Tax Act.
The HRA will be subject to full taxation for people who do not reside in a leased home.

LTA

This part of the compensation is paid to cover the employee's and his or her family's domestic holiday travel costs. This allocation is specifically for flight and train tickets. According to the Income-tax Act, there is a maximum tax exemption available on the LTA amount.

Employee Pension Plan (EPF)

This is a required savings plan that businesses of a particular size are required to offer. It is put in the EPF account and is calculated to be 12% of an employee's base pay. Equal contributions are made to each employee's EPF account by the employer. Tax deductions for employee contributions are allowed up to ₹1.5 lakh per year. The employer's contribution is not shown on the pay stub since it is included in the CTC.

Specialised Tax

Every employee who earns a particular amount in compensation is required to pay this tax to the state government. This sum is limited to ₹2,500 per fiscal year.

To calculate monthly CTC (Cost to Company) from salary, you need to consider the following components:

Basic Salary: It is a fixed component of the salary which is decided by the company and is usually a percentage of the total CTC. For example, if the basic salary is 40% of the CTC, then it can be calculated as Basic Salary = (CTC x 40%) / 12.

House Rent Allowance (HRA): It is given to employees to cover their rental expenses. The actual amount of HRA depends on the city of residence and is usually a percentage of the basic salary. For example, if the HRA is 50% of the basic salary, then it can be calculated as HRA = Basic Salary x 50%.

Special Allowance: It is an additional component of the salary which is given to employees to cover other expenses. The amount of special allowance varies from company to company.

Provident Fund (PF): It is a retirement benefit scheme in which both the employer and the employee contribute a certain percentage of the basic salary towards the fund. The PF contribution is usually fixed at 12% of the basic salary.

Employee State Insurance (ESI): It is a social security scheme which provides medical and other benefits to employees. The ESI contribution is usually fixed at 0.75% of the total CTC. Once you have the values for these components, you can calculate the monthly CTC as follows:

Monthly CTC = (Basic Salary + HRA + Special Allowance + PF + ESI) / 12

For example, if the basic salary is ₹20,000, HRA is ₹10,000, special allowance is ₹5,000, PF is 12% of the basic salary, and ESI is 0.75% of the total CTC, then the monthly CTC can be calculated as follows:

Monthly CTC = (₹20,000 + ₹10,000 + ₹5,000 + (₹20,000 x 12%) + (₹35,000 x 0.75%)) / 12 = ₹45,145.83.

To calculate Inhand salary from CTC, follow these steps:

• Determine the Employee's Gross Salary: This is the total salary paid by the employer before any deductions

• Subtract the Employee's Contribution to EPF: This is typically 12% of the employee's basic salary. The employer also contributes an equal amount to the EPF

• Subtract Other Statutory Deductions: These include professional tax, which varies from state-to-state, and any other taxes that are applicable

• Subtract Any Voluntary Deductions: These could include insurance premiums, loan repayments, or other deductions that the employee has opted for

• Add Any Allowances: These could include house rent allowance (HRA), travel allowance, or any other allowances that are provided by the employer

The take-home pay calculator offered by Vakilsearch is quick and easy to use. The procedures to use the same are as follows:

• Decide if the old or new tax system is preferred

• Decide if you want to reside in a metro area or not

• Type in the full cost to the company (CTC)

• Enter the starting wage

• Enter the monthly rent paid

• Enter the monthly HRA that the employer offers

• Indicate the total amount invested under Section 80C

• Enter the sum you paid toward your health insurance deductible

• Give the EPF amount per month; enter the employer and employee contributions individually.

The calculator will quickly display the following results after the necessary information has been entered:

• Take-home pay (monthly)

• Take-home pay (annual)

• Revenue tax

• The sum that is left over after taking into account deductions from gross pay is known as an employee's take-home pay.

For better understanding let's consider the following income and spending breakdown for an employee:

Annual CTC = ₹10 lakhs

Monthly base salary: ₹30,000

Monthly rent paid equals ₹30,000

HRA is ₹15,000

₹1.5 lakhs in investments for Section 80C

Monthly medical insurance premium: ₹2,000

Employee and employer contributions together equal ₹1,800 per month for EPF

As of the former tax system, an annual income tax equals around ₹28,475.

The following formula will determine the net yearly take-home pay under the old tax system:

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

In addition to annual take-home pay, Vakilsearch's annual salary calculator now displays monthly take-home pay. You can use the monthly salary calculator per month to make it simpler to understand how much money would be available to him or her each month.