7 Components To Check For Calculating In Hand Salary

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Check For Calculating In Hand Salary

Understanding in hand salary and CTC is important if you are in the last year of college and about to get placed. Your salary slip is not as simple and complicated as it looks. However, many students tend to get confused between these two and consider both as the same. In reality, both are different, CTC is the total cost incurred by the company to appoint and retain the employee whereas In hand salary is part of the total salary package offered to the employee. However, you can use In hand salary calculator to ease the process. Therefore, the in-hand salary is remarkably different from the Cost to Company or CTC.

In this article, we are going to learn about In hand salary, understand different components of In hand salary, and how to use In hand salary calculator to gauge take-home salary or in-hand salary.

In hand salary calculator can gauge your take-home salary in seconds

Components of a salary slip

Employees receive salary slips from their employer at the end of every month and this salary slip is needed while applying for other jobs. Based on your current salary slip, your next offered salary is decided. Employees also use a hand salary calculator to calculate the take-home salary or the net salary. It’s the amount you receive after all the deductions. 

The salary slip is the most significant document as it allows you to apply for credit cards, loans, etc. It is also required while filing your income tax returns. So, it is essential to understand the parts of the salary slips and for a better understanding, you can use the take home salary calculator. The salary slip consists of various components that are different from company to company. The components of a salary slip are discussed below: 

#1. Basic pay

Basic pay or Basic salary is generally 35 to 50% of the total salary and it is a significant part of your CTC. Basic pay is the basis to gauge the other components of your salary slip. The other allowances are determined by the amount of basic pay. The more the basic salary, the more your allowances will be. However, the basic salary also depends on the designation of the employees and the industry.

#2. Dearness allowances

Dearness allowances are provided to employees to lessen the effect of inflation on their salary or to balance the rising living expenses. This allowance is paid by the government. It is based on the living expenses of the city you are living in and is 30 to 40 % of the basic salary. However, this allowance is fully taxable.

#3. House rent allowance

House rent allowances are provided to employees who live in rented accommodation and these expenses are incurred by the company. Employees who are living in a rented place can avail of tax benefits by claiming HRA exemption. The amount of the HRA is determined by the type of city you are living in. For example, if you live in a metro city, the HRA is 50% of the basic salary and in other cities, HRA is 40% of the basic salary.

#4. Leave travel allowances

Leave travel allowances cover the travel expenses during a holiday for the employees and their families. You can claim tax exemption on LTA if you have given proof of the travel expenses. However, you can claim tax exemption for up to two journeys in a four-calendar-year block.

#5. Special allowance

Special allowance is given to the employees who have performed well. Hence, employers reward them by offering special allowances to uplift and praise their performance. This allowance is fully taxable.

#6. Employee provident fund or EPF

EPF contributions of 12 % are made by both the employer and employee. EPF helps employees to save and grow their money at the same time. However, you can claim tax benefits up to INR 1.5 lakhs U/S 80C of the Income Tax Act.

#7. Professional Tax

Professional tax is paid to the state government states that levy professional tax in Andhra Pradesh, Karnataka, Maharashtra, West Bengal, Gujarat, TamilNadu, Telangana Kerala, and Assam. However, the amount cannot exceed more than INR 2,500 per year. 

It is important to have prior knowledge of the difference between CTC and hand salary, components of the salary before joining a company as an employee and use a hand salary calculator online to gauge the take home salary. In hand salary calculator not only shows the take home salary but also shows the other deductions. CTC is the total cost incurred by the company to hire an employee and the amount can put you on cloud nine but the reality is the in-hand salary is significantly different than CTC. Understand the different allowances you will be provided to claim tax deductions. You can claim tax exemption if you have prior knowledge of it.

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