From Gross to In-Hand: The Complete Flow
Your in-hand salary is the amount that actually lands in your bank account each month—after all statutory and voluntary deductions. It's not your CTC, and it's not your gross salary. In India, the calculation follows a clear flow: Start with gross salary (Basic + HRA + allowances + variable pay), then subtract Employee PF (12% of basic, capped at ₹1,800), income tax (TDS based on your regime and deductions), professional tax (state-specific, typically ₹200/month), and any other deductions. Understanding this flow helps you decode your payslip, plan your budget, compare job offers, and know exactly where your money goes. This guide explains how in-hand salary is calculated in India with a detailed step-by-step example using a ₹10 LPA salary.
Key Takeaways
- In-hand = Gross − Deductions. Gross = Basic + HRA + allowances (monthly earnings)
- Employee PF: 12% of basic, capped at ₹1,800/month if basic > ₹15,000
- Income tax: Based on regime, taxable income, slab rates. Declare 80C, 80D, HRA for lower TDS
- Professional tax: State-specific, typically ₹200/month. Applied before in-hand
- Example: ₹60K gross → ₹53,200 in-hand (with typical deductions)
Components of Gross Salary
- Basic salary: Core component. Affects PF, gratuity. Often 40–50% of CTC.
- HRA: House rent allowance. Partly or fully exempt if you pay rent and submit proof.
- Special allowance: Usually fully taxable. May include conveyance, medical, etc.
- Other allowances: Conveyance, medical reimbursement (exempt up to limit if with bills), performance bonus (when paid).
- Exclude from monthly gross: Employer PF, gratuity—these are cost-to-company, not your earnings.
Deductions Applied
- Employee PF: 12% of basic. Cap: ₹1,800/month if basic exceeds ₹15,000.
- Professional tax: Varies by state. Maharashtra, Karnataka: ₹200/month. Not in Delhi, UP.
- Income tax (TDS): Calculated on annual taxable income, divided by 12 for monthly deduction.
- Other: Group insurance, meal card recovery, loan EMIs, salary advance repayment—if applicable.
Full Example: ₹10 LPA CTC
📊 Basic ₹30,000, HRA ₹12,000, SA ₹21,667. Old Regime, 80C ₹1.5L, HRA exempt
Second Example: Same Gross, New Regime, No HRA
Same gross ₹63,667. But: New Regime, no HRA exemption (living with parents), 80C ₹50,000 only. Taxable income higher. Annual tax ~₹35,000. Monthly TDS ~₹2,917. In-hand = ₹63,667 − ₹3,600 − ₹200 − ₹2,917 = ₹56,950. Same gross, ~₹1,750 less in-hand due to regime and deductions. This shows why structure and regime matter.
How Taxable Income Is Derived
- Annualise gross: Monthly gross × 12. Add bonus if any.
- Subtract standard deduction: ₹50,000 (Old) or ₹75,000 (New).
- Subtract 80C, 80D, HRA (Old Regime). New Regime has almost no other deductions.
- Taxable income = Gross − Deductions. Apply slab rates, add 4% cess.
- Monthly TDS = Annual tax ÷ 12. Employer deducts this each month.
Why Your In-Hand May Differ Month to Month
- Bonus or variable pay: Extra income in that month → higher gross, higher TDS.
- Arrears: Past salary paid later. Tax may be higher in that month.
- Investment declaration: After submitting 80C/80D/HRA proofs, employer may revise TDS—subsequent months see lower deduction.
- Regime change: Switching regime mid-year changes TDS from that month.
Use Our In-Hand Salary Calculator
Enter basic, HRA, allowances, tax regime, 80C, 80D, HRA exemption. Get accurate in-hand estimate. Use before accepting offers or planning EMIs.
Disclaimer
Examples are indicative. Actual in-hand depends on employer computation and exact deductions. Verify with payslip.