Are you a salaried employee who wants to know how much money you actually take home every month? Do you want to find out how to save tax on your salary and increase your in-hand income? If yes, then you should try using an in-hand salary calculator.
In this blog post, we will explain what an in-hand salary calculator is, what are the components of the salary structure, what are the ways to get more in-hand salary, how to save tax on salary, how salary calculators work, and what are the benefits of using a salary calculator in India.
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In-Hand Salary Calculator
In-Hand Salary Calculator Results
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What is an In-Hand Salary Calculator?
An In-Hand salary calculator is an online tool that helps you estimate your net salary, or take-home salary, after deducting all the taxes and other deductions from your gross salary. Your gross salary is the total amount that your employer pays you before any deductions. Your net salary is the amount that you receive in your bank account every month.
An In-hand salary calculator can help you understand your salary structure and plan your finances better. You can also compare different salary packages and negotiate your pay with your employer using a salary calculator.
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What are the Components of the Salary Structure?
Your salary structure consists of various components that affect your tax liability and in-hand income. Some of the common components of the salary structure are:
- Basic Salary: This is the fixed and taxable amount that forms the base of your salary. It is usually 40-50% of your CTC (Cost to Company) and determines other components like HRA, PF, etc.
- House Rent Allowance (HRA): This is the amount that your employer pays you to cover your rent expenses if you live in a rented accommodation. HRA is partially or fully exempt from tax depending on certain conditions.
- Leave Travel Allowance (LTA): This is the amount that your employer pays you to cover your travel expenses within India when you are on leave. LTA is exempt from tax up to the actual travel expenses incurred by you, subject to certain limits and proofs. You can claim LTA exemption for two trips in a block of four years.
- Special Allowance: This is the amount that your employer pays you to meet various expenses like food, clothing, education, etc. Special allowance is fully taxable and varies from company to company.
- Bonus: This is the amount that your employer pays you as a reward for your performance or as an incentive. Bonus is fully taxable and usually paid once or twice a year.
- Employee Contribution to Provident Fund (PF): This is the amount that you contribute to your PF account every month. PF is a social security scheme that provides retirement benefits to employees. You contribute 12% of your basic salary to PF every month and your employer matches the same amount. Your contribution to PF is eligible for deduction under Section 80C of the Income Tax Act.
- Professional Tax: This is the tax on employment that is levied by some state governments. Professional tax varies from state to state and is deducted from your gross salary every month.
The table below shows an example of a salary structure for an employee with a CTC of Rs. 10 lakhs per annum.
|Amount (per annum)
|Rs. 5 lakhs
|Rs. 2 lakhs
|Exempt up to actual expenses
|Rs. 1 lakh
|Rs. 1 lakh
|Employee PF Contribution
|Deductible under Section 80C
|Deductible from gross salary
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What are the Ways to Get More In-Hand Salary?
To increase your in-hand salary, primarily by reducing your tax liability and optimizing your salary structure, consider the following strategies:
- Claim House Rent Allowance (HRA) Exemption: If you are living in rented accommodation, you can claim HRA exemption. The exemption amount is the least of the following:
- Actual HRA received.
- 50% of your basic salary if living in a metro city (40% for non-metro cities).
- Rent paid minus 10% of your basic salary. To claim this exemption, provide your rent receipts or rent agreement as proof.
- Utilize Leave Travel Allowance (LTA): LTA exemption covers actual travel expenses incurred within India. It is claimable for two trips in a four-year block. You need to submit travel tickets to avail of this exemption.
- Investments under Section 80C: Section 80C offers a deduction of up to ₹1.5 lakhs per year for various investments and expenses, including:
- Employee Provident Fund (EPF) contributions.
- Public Provident Fund (PPF).
- National Savings Certificate (NSC).
- Tax-saving Fixed Deposits.
- Equity-Linked Savings Scheme (ELSS).
- Life Insurance Premiums.
- Home Loan Principal Repayment.
- Tuition Fees for children.
- Sukanya Samriddhi Yojana.
- Deductions under Section 80D: Claim deductions up to ₹25,000 for health insurance premiums for yourself, spouse, and dependent children. An additional deduction of the same amount is available for premiums paid for parents’ health insurance (₹50,000 if they are senior citizens).
- Interest on Education Loan (Section 80E): Deductions on the interest paid on an education loan taken for higher studies (for yourself, spouse, or children) are available without any upper limit, applicable for up to eight years.
- Charitable Contributions (Section 80G): Deductions for donations to certain charitable institutions and funds are available. The deduction amount can be 50% or 100% of the donated amount, subject to the eligibility of the recipient organization.
- Savings Account Interest (Section 80TTA): Deductions up to ₹10,000 for interest income earned from savings accounts in banks, post offices, or cooperative societies.
How to Save Tax on Salary?
Apart from claiming exemptions and deductions, there are some other ways to save tax on salary income. Some of them are:
- Opt for the new tax regime: The government has introduced a new tax regime from FY 2020-21 onwards, which offers lower tax rates but does not allow any exemptions or deductions. You can choose between the old and new tax regimes depending on your income level and tax-saving preferences. The table below shows the comparison of the tax rates under the old and new tax regimes.
- Opt for a joint home loan: If you are planning to buy a house with a home loan, you can opt for a joint home loan with your spouse or any other co-borrower who has a separate source of income. This way, you can both claim deductions for interest and principal repayment under Section 24 and Section 80C respectively, up to the respective limits.
- Opt for NPS: National Pension System (NPS) is a voluntary retirement savings scheme that allows you to invest in various market-linked funds and get a regular pension after retirement. You can claim deductions up to Rs. 1.5 lakhs under Section 80C and an additional deduction of Rs. 50,000 under Section 80CCD(1B) for your contributions to NPS.
Consider reading: Best Tax Saving Options for Salaried Employees in India
How Do In-Hand Salary Calculators Work?
An in-hand salary calculator is a useful online tool for individuals wanting to understand their net salary, commonly known as take-home pay. Here’s an overview of how these calculators function:
- Entering Basic Details: You start by inputting essential information such as your Cost to Company (CTC), any bonuses included in the CTC, monthly professional tax, contributions to Provident Fund (PF) by both employer and employee, and any additional deductions you might have each month.
- Gross Salary Calculation: The calculator computes your gross salary. This calculation includes adding up your basic salary, House Rent Allowance (HRA), Leave Travel Allowance (LTA), special allowances, bonuses, and other salary components.
- Taxable Salary Determination: To calculate your taxable income, the calculator deducts eligible exemptions like HRA, LTA, standard deduction, professional tax, and others from your gross salary. This provides a figure for your taxable income.
- Income Tax Calculation: Using the current income tax slabs and applicable surcharges, the calculator assesses your income tax liability based on your taxable income.
- Final Take-Home Salary: Finally, the calculator arrives at your net salary or in-hand salary. This is done by deducting income tax and other deductions from your gross salary.
Consider using our Lumpsum Investment Calculator to check returns on your lumpsum investments.
Benefits of In-hand Salary Calculator in India
Using an In-hand salary calculator in India can have many benefits for salaried individuals. Some of them are:
- It helps you understand your salary structure and how each component affects your tax liability and in-hand income.
- It helps you plan your finances better by giving you a clear picture of your monthly income and expenses.
- It helps you compare different salary packages and negotiate your pay with your employer based on the net salary and tax savings.
- It helps you save tax on salary by suggesting the best exemptions and deductions that you can claim based on your income level and tax-saving preferences.
- It helps you file your income tax returns easily by providing you with the details of your income, tax, and deductions.
Final Thoughts on In-hand Salary Calculator
In this blog post, we have explained what an in-hand salary calculator is, what are the components of the salary structure, what are the ways to get more in-hand salary, how to save tax on salary, how salary calculators work, and what are the benefits of using a salary calculator in India.
We hope that this blog post has helped you gain some insights into your salary and tax matters. If you want to try out an in-hand salary calculator, you can use our in-hand Salary Calculator to calculate your net salary in minutes. Thank you for reading!
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