Pay slip is a financial statement that includes all the economic activity such as payments, bonuses, deductions and expenses over a certain period of time given by a company to an employee. Certain deductions contain payments for taxes, pensions, insurances, contributions, dues, loan, health care services, and Salary Slips show’s income like salaries, allowances, bonuses, overtime, official loans disbursed and other earnings.
Start by calculating the gross salary:
The gross salary is not base salary or your CTC. It can be found out by deduction the employer's contribution to the provident fund (EPF) and the gratuity and cost to company (CTC).
Gross salary = Cost to company (CTC) - Contribution of the employer') - gratuity
Gratuity = (base salary + DA) × 15/26 × Number of years of service
The bonus that is subtracted each year is = 15/26 x Basic salary (monthly) X 1
Next, calculate the taxable income: The taxable income is obtained by subtracting the tax-free allowance, housing allowance (HRA), leave allowance and health insurance, tax savings investments
Taxable income = Gross salary – epf deduction (DA - HRA - LTA - Medical insurance – Taxes Other deductions)
The HRA that may be exempt is calculated as the minimum of three values:
The amount received as an employer's HRA.
Real income minus 10% of base salary.
50% of the base salary if you are staying in a metropolitan city and 40% in a non-metropolitan city
Calculate the income tax: Calculate the income tax by applying the tax rates and the following tax rates. This is the new income level proposed by Arun Jaitley in the 2018 budget.
Calculate in hand salary; Subtract the income tax, the retirement fund and the professional gross income tax
In hand salary= Gross salary - Income tax - Employee's - Professional tax.
●Gross salary = Cost for the company (CTC) - Employer contribution (EPF) - gratuity.
● income tax on salary = Gross salary - Employee contribution - DA - HRA - LTA - Medical bills - Medical insurance - Taxes - Other deductions.
●In hand salary = Gross salary - Income tax - Employee contribution PF (PF) - Prof.
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