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Annual CTC
Annual Net Salary
Total Deductions
Tax Savings
Salary Components
Salary Breakdown
Understanding Your Salary Structure
Your salary structure consists of various components that determine your final take-home salary. Understanding these components helps you negotiate better packages and plan your finances effectively.
Salary Components:
- Basic Salary: Usually 40-50% of CTC, forms the base for other calculations
- HRA (House Rent Allowance): 40-60% of basic salary, provides tax benefits
- Special Allowance: Remaining amount after basic and HRA, fully taxable
- PF (Provident Fund): 12% of basic salary, matched by employer
- Professional Tax: State-specific tax, usually ₹2,400 annually
- Income Tax: Based on your tax bracket and applicable slab rates
Tax Optimization Tips:
- Maximize HRA exemption if you pay rent
- Invest in 80C instruments (PF, ELSS, PPF) up to ₹1.5L
- Claim medical insurance under 80D
- Use transport and meal allowances for tax benefits
Frequently Asked Questions
What is CTC and how is it different from take-home salary?
CTC (Cost to Company) is the total amount a company spends on an employee, including salary, benefits, and taxes. Take-home salary is what you actually receive after all deductions.
How is PF calculated?
PF is calculated as 12% of your basic salary. Both employee and employer contribute equally. This amount is deducted from your salary and goes towards your retirement fund.
Can I optimize my salary structure for tax benefits?
Yes, you can restructure your salary to include components like HRA, transport allowance, and meal vouchers to reduce your taxable income legally.
What is the standard ratio of basic salary to CTC?
Typically, basic salary should be 40-50% of CTC. A higher basic salary means higher PF contribution but also higher retirement benefits.