The take home salary, also known as the net salary, is the amount an employee receives after all deductions have been made from their gross salary.
These deductions typically include taxes, provident fund contributions, professional tax, and any other applicable deductions.
Essentially, the take-home salary is the actual amount of money an employee gets in their bank account.
Components of Gross Salary:
1. Basic Salary:
The core of the salary structure, usually a fixed part of the compensation.
2. Dearness Allowance (DA):
An allowance to counteract inflation, often a percentage of the basic salary.
3. House Rent Allowance (HRA):
Provided to cover housing expenses.
4. Special Allowance:
Any additional allowances provided by the employer.
5. Other Allowances:
Any other benefits like conveyance, medical allowance, etc.
Common Deductions:
1. Employee Provident Fund (EPF):
Usually 12% of Basic Salary + DA.
2. Professional Tax (PT):
Varies by state, with a maximum of ₹2,500 annually.
3. Income Tax:
Based on the applicable tax slab rates.
4. Other Deductions:
Such as health insurance premiums, loan EMIs, etc.
Calculation of Take Home Salary:
To calculate the take-home salary, follow these steps:
1. Start with the Gross Salary:
Sum up all the components of the gross salary including basic, DA, HRA, and any other allowances.
2. Deduct EPF:
EPF=(Basic Salary+DA)×0.12\text{EPF} = (\text{Basic Salary} + \text{DA}) \times 0.12EPF=(Basic Salary+DA)×0.12
3. Deduct Professional Tax (PT):
This depends on the state regulations. For example, in Karnataka, the maximum is ₹200 per month for salaries above ₹15,000.
4. Calculate Taxable Income:
Taxable Income=Gross Salary−Standard Deduction\text{Taxable Income} =
\text{Gross Salary} – \text{Standard Deduction}Taxable Income=Gross Salary−Standard Deduction
5. Calculate Income Tax:
Based on the applicable tax slab rates, calculate the annual income tax and divide it by 12 to get the monthly income tax.
6. Deduct Monthly Income Tax:
Subtract the calculated monthly income tax from the gross salary.
7. Other Deductions:
Subtract any other deductions like health insurance, loan EMIs, etc.
8. Calculate Take Home Salary:
Take-Home Salary = Gross Salary−(EPF+PT+Monthly Income Tax+Other Deductions)
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