The difference amount between the offered CTC and the take-home salary is the result of several deductions which occur at the time of payout. It is important to understand the different types of deductions as it helps to calculate your take-home salary accurately. To make things simpler for you, we have listed down all the salary deductions:
Income TaxThis is one of the most important deductions under your salary. Income tax deductions for salaried employees are determined depending on the employee’s annual salary. Tax is generally deducted at the source and is also known as TDS. Professional who provide service to companies usually pay an income tax of 10% whereas salaried employees don’t have to pay anything upfront. But, at the end of the financial year, they are required to file an income tax return where income tax waiver and exemptions are allowed.
Provident FundThis is another major deduction occurring from your monthly salary. The entire amount is divided into two parts; one part is contributed by the employee and other by the employer. This is mainly kept aside as the financial security of the employee when they retire. The amount of PF is decided based on the employee’s salary and is directly transferred to the employee’s PF account and can be withdrawn at the end of the service with the employer.
Professional TaxThis is the tax levied by the state government in which the employee is working. The tax is mainly for professional services, employment, trade, and calling. The deduction is filed under Section 16 of the Indian Income Tax Act. The professional tax amount may vary from state to state. The tax is similar to income tax, and the only difference is that professional tax is levied by the state government, whereas the central government levies income tax.
ESIThis is a deduction done for medical services provided by the employer. Under this benefit, the employee can get standard medical services from the designated list of hospitals and also get medicines at low prices.
Other DeductionsSome organisations provide added facilities which may lead to some more deductions from your gross salary. This may include mess or cafeteria deductions, transportation deductions for the services offered by the company, leave deductions if the employee exceeds the number of leaves above the designated number, etc.
Once you know the various deductions that are made to your gross salary, you will be able to calculate the exact in-hand salary using the salary deduction calculator that you will be receiving from your employer at the end of every month.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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