How to calculate your in-hand salary

Getting that message that the salary has been credited to your account surely gives a different kind of happiness. However, oftentimes even though we are aware of our CTC we don’t know for sure the in-hand salary. So here is a quick guide to help you calculate your in-hand salary based on your CTC so that the next time you know what to expect when someone tells you your package.

First, let us understand some key terms you will often hear whenever your salary is in the conversations.

Term	Meaning	Value
Basic Salary	Salary before any additions or deductions. It is paid out irrespective of whether the employee meets the goals	40 to 50% of CTC
House Rent Allowance (HRA)	The part of the salary that is given for rent payment	30% of base salary
Ex gratia/Gratuity/Variable performance Pay	money that your company pays as a token of appreciation of your services.If the amount is above 10 lakhs it is called ex gratia	No legal obligation to pay and is optional
Special allowance	Remaining part of the total allowance that could not be clubbed under any head	Varies
Cost to Company (CTC)	The amount of money your employer spends to hire you and to sustain you as an employee. The CTC is comprised of several components that are added on top of the basic pay. This is also the amount that is shared with you as a salary package.	Varies depending on the value of other variables
Gross Salary	Amount left after EPF and gratuity are subtracted from the CTC.	Varies based on the value of other variables
Net Salary (or In hand salary)	Salary that an employee gets after taxes and other deductions have been made from your salary.	Varies based on the value of other variables
Employer’s contribution towards PF	Both the employer and the employee must make EPF contributions	12% of basic salary

Note: The difference between Gross salary and in-hand salary is that income tax, professional tax and other deductions as per the company policy are part of the gross salary but not the in-hand salary.

Hence, Net salary (or in hand salary) = gross salary – (Income tax + Professional tax)

But how do exactly calculate your in-hand salary?

Once you have these values you can easily calculate your in-hand salary:

Net salary/in-hand salary = CTC – PF (employer and employee’s contribution)- other deductions(Food coupons)- Tax liability (includes cess)

Are you confused about how to calculate your tax liability or what to do with cess or how to measure other deductions and whether you need to do it all every time you change your job? Well don’t worry nowadays you can find several automated in hand salary calculators like the one made by Khatabook that can tell you all you need to know about your in-hand salary with the click of a button within seconds.

At the beginning of their careers, most young professionals aren’t aware that the CTC will be different from the in-hand salary they’ll receive at the end of the month.

But with a knowledge of your in-hand salary not only are you better aware as to what your job package entails but you can also increase your take-home salary with prudent tax planning so as to circumvent any potential tax deductions.