* Disclaimer:

  1. We have considered Professional tax rate slabs of Karnataka State.
  2. We have taken 40% of gross pay as basic salary for PF calculation.
  3. We made only mandatory PF deductions.
  4. We have calculated employee insurance premium for an assured amount of Rs 5 lakh.
  5. The users either can edit the existing deductions, or they can enter the additional deductions.
  6. We have not deducted income tax while calculating net pay/ take home salary.

Click here to know how much tax you have to pay for the above salary

What is Salary?

The regular payment made by the employer to the employee for the work is called the salary. The employment contract would specify the wages, with the payment usually made each month. The components of the salary structure are:

Basic Salary: It is the employee’s basic income and is around 40%-50% of the total salary. The employer pays the employee for his skill, experience, and qualifications. The basic salary is a fixed component of the CTC (Cost To Company) package.

House Rent Allowance (HRA): It is the component of the salary offered by the employer to the employees, who reside in rented accommodation. The house rent allowance or HRA is partially or fully exempt from taxes under Section 10(13A) of the Income Tax Act. However, HRA is fully taxable if you don’t live in rented accommodation.

Leave Travel Allowance (LTA): The employer gives an allowance to the employee for travel expenses called the leave travel allowance. Employees must submit proof of travel to claim the allowance. A salaried employee can claim the LTA exemption under Section 10(5) of the Income Tax Act.

Special Allowance: The component in your salary structure called the special allowance is fully taxable in your salary.

Bonus: The employer may pay a performance incentive to the employee called the bonus. It is a part of the gross salary and is fully taxable in the hands of the employee.

Employee contribution to the provident fund: Both the employer and the employee contribute 12% of the employee’s basic salary each month, to the EPF or employee provident fund. The contribution made by the employee towards the EPF is available for a deduction under Section 80C of the Income Tax Act, 1961.

Professional Tax: Professional tax is the tax on employment levied by the state. The state can charge the maximum amount of Rs 2,500 as a professional tax in a financial year.

What is a Salary Calculator?

The salary calculator is a simulation that calculates your take-home salary. It is the total salary an employee gets after all the necessary deductions. The salary calculator consists of a formula box, where you enter the Cost To Company (CTC) and the bonus included in the CTC.

The salary calculator will show you the deductions such as the employer and employee provident fund, professional tax, employee insurance, and the take-home salary.

How does salary calculators work?

To calculate the take-home salary, you must enter the Cost To Company (CTC) and the bonus if any as a fixed amount or a percentage of the CTC.

For example, your Cost To Company (CTC) is Rs 8 lakh. The employer gives you a bonus of Rs 50,000 for the financial year. Your total gross salary is Rs 8,00,000 – Rs 50,000 = Rs 7,50,000. (The bonus is deducted from the Cost to Company).

Gross Salary = Rs 8,00,000 – Rs 50,000 = Rs 7,50,000.

You then deduct the professional tax of Rs 2,400 a year (This is the professional tax in the State of Karnataka). You then deduct the contributions of both the employer and you (employee) towards the Employee Provident Fund (EPF).

You must compute the EPF contribution on a maximum salary limit of Rs 15,000 per month. It translates to 12% of Rs 15,000 = Rs 1,800 a month or Rs 21,600 per year.

So, you have Rs 21,600 as a yearly contribution made by the employee towards the EPF and a similar contribution of Rs 21,600 by the employer towards the EPF. (You have 8.33% of the employer’s contribution that gets diverted to the employee pension scheme). You also have a yearly deduction of Rs 3,000 towards employee insurance.

Total Deductions = Professional tax + EPF (Employee Contribution) + EPF (Employer Contribution) + Employee Insurance.

Total Deductions = Rs 2,400 + Rs 21,600 + Rs 21,600 + Rs 3,000 = Rs 48,600.

Take-Home Salary = Gross Pay – Total Deductions

Take-Home Salary = Rs 7,50,000 – Rs 48,600 = Rs 7,01,400.

How to use the ClearTax Salary Calculator?

The ClearTax Salary Calculator shows you the take-home salary in seconds.

To use the ClearTax Salary Calculator:

  • You must enter the yearly cost to the company or the CTC.
  • Enter the bonus included in the CTC as a percentage or amount.
  • The ClearTax Salary Calculator will show you the performance bonus and the total gross pay.
  • It will also display the professional tax, employer PF, employee PF, Employee insurance, and the take-home salary.

Benefits of using the ClearTax Salary Calculator

  • The ClearTax Salary Calculator will calculate your take-home salary in seconds.
  • The calculator shows the changes in salary structure if you get a bonus. You get to know the benefits under a new compensation package.
  • The ClearTax Salary Calculator shows you the various components of your salary.
  • You get an idea of your contribution and the employer’s contribution towards your employee provident fund.

FAQs on the ClearTax Salary Calculator

  • Why does the ClearTax Salary Calculator ask if the bonus in CTC is a fixed amount or a percentage?
    The ClearTax Salary Calculator calculates the take-home salary based on whether the bonus is a fixed amount or a percentage of the CTC. If you enter the bonus as a percentage of the CTC, the calculator will calculate the performance bonus as a percentage of the cost to the company. If you enter a fixed amount, the calculator considers this figure as the performance bonus.
  • How does the ClearTax Salary Calculator calculate the total gross pay?
    The ClearTax Salary Calculator asks you to enter the bonus as a percentage of the cost to the company or a fixed amount to calculate the performance bonus. It subtracts the performance bonus from the cost to the company to give you the gross pay.
  • Is the ClearTax Salary Calculator easy to use?
    The ClearTax Salary Calculator is an easy-to-use tool. You may use it from the comfort of your home to calculate the take-home salary in seconds.
  • Why does the ClearTax Salary Calculator consider deductions?
    The ClearTax Salary Calculator will deduct the professional tax, employer PF, employee PF and employee insurance from the gross pay. The calculator will display the net pay.