Online Salary Calculator
A salary calculator is an online tool that calculates your salary in a matter of a few minutes. It is in tune with the local, state and national levies or taxes and gives accurate estimates. It is a useful tool to calculate the net income or the take-home salary.
It is a widely used online resource for job seekers, career changers, and employees to compare their salary to others in their industry, their city, or even their own company.
What is salary?
Salary refers to the periodic payment that an employer pays to his or her employee in exchange for the work done or the services provided. A salary might be paid on an hourly, daily, weekly or monthly basis.
The components of salary are:
- Basic salary: which usually amounts to 40-50% of the total salary paid by the employer. This amount is determined based on the employee’s skills, qualifications, position in the organisation etc. It is the fixed component of the CTC (Cost To Company) package.
- House rent allowance: refers to that part of the salary offered to those employees that reside in rented accommodation. It is partially or fully exempted from taxes as per Section 10(13A) of the Income Tax Act.
- Leave travel allowance: is claimed for the travel expenses incurred by the employee. This amount is given by the employer on submission of adequate proof. A salaried employee can claim the leave travel allowance exemption under Section 10(5) of the Income Tax Act.
- Special allowance: as given by the employer is fully taxable under the Act.
- Bonus: is a performance incentive offered by the employer to the employee. It is fully taxable under the Act.
- Employee contribution to provident fund (EPF): to which both the employee and the employer contribute to (at the rate of 12%), is available for exemption under Section 80C of the Act.
- Professional tax: as levied by the state can be for a maximum amount of INR 2,500.
Are there any indirect benefits?
Though indirect benefits are monetary in nature, the payment is usually not made in the form of cash. The financial value of these can be calculated easily. However, these benefits offered might differ from one organisation to the next.
· Subsidized meals or food coupons
· Company leased accommodation
· Interest free loans
· Health and life insurance premium
What are the contributions to your savings?
· Gratuity: which is that part of the salary that the employer pays to the employee gratuitously for his or her services, is a defined benefit that can be received only at the time of the employee’s retirement. Under Section 10 (10) of the Income Tax Act, an employee only receives the gratuity after having completed 5 years or more of full-time service in an organisation.
· Superannuation benefits: is a kind of retirement benefit that the employer has to offer. The employer opens the superannuation benefit fund with an approved agency and contributes a maximum of 15% of the salary to superannuation funds on behalf of the employee, making it a part of the CTC structure.
· EPF: is an employee-benefit scheme prescribed by the Union Ministry of Labour which provides employees with facilities such as medical assistance, retirement, education for children, insurance support, and housing. The employee can withdraw the amount collected at the time of retirement, or termination of services or migration abroad.
Please note: individuals in a company can be hired as permanent employees or on a contractual basis. In case of the latter, they might not avail the employment benefits that permanent employees enjoy such as bonuses, leaves, tax benefits, insurance etc.
What is a salary calculator and how does it work?
In order to calculate one’s take-home salary, a salary calculator comes hand. It is a formula box that puts forth the net salary that the employee gets to take home after all the necessary deductions such as the professional tax, EPF etc.
The CTC and bonus amount must be entered into the calculator – the difference of which will be your gross salary. Then the total deductions are to be calculated. The formula for the same is
Total Deductions = Professional tax + EPF (Employee Contribution) + EPF (Employer Contribution) + Employee Insurance.
Finally, the take-home salary would amount to the difference between the gross salary and the total deductions.
Please note: that the values received through the Salary Calculator app may not match your salary slip in certain cases. For example, if the salary structure has a variable pay component or if the PF deduction is not along the presumed amount of 12%.
A salary calculator, though not 100% accurate in all instances, can be used to get an average salary in your field, to negotiate your salary, or evaluate a career change. Use it wisely and reap the benefits that this tool has to offer.