From Gross to Net: Understanding Your Paycheck
The salary figure discussed during a job offer is the "gross salary," but the amount credited to your bank account is the "net" or "take-home" salary. The difference between these two figures is due to taxes and other deductions. Using a salary calculator is the easiest way to determine your in-hand pay and plan your budget effectively.
Common Deductions Explained
For India (₹)
- Provident Fund (EPF): A mandatory retirement saving scheme. 12% of your basic salary is contributed by you, and an equal amount by your employer.
- Professional Tax: A small state-level tax on employment.
- Income Tax (TDS): Tax deducted at source based on your income slab and chosen tax regime (Old vs. New). Our income tax calculator handles this automatically.
- Old Regime Deductions: Under the old tax regime, you can claim deductions for HRA, 80C investments (like PPF, ELSS, insurance), and more.
For USA ($)
- Federal Income Tax: A progressive tax based on your income bracket and filing status.
- FICA Taxes: This includes Social Security (6.2%) and Medicare (1.45%) taxes, which fund retirement and health benefits.
- 401(k) Contributions: Pre-tax contributions to a retirement savings plan, which reduces your taxable income.
- State & Local Taxes: Highly variable depending on your location (Note: our calculator estimates federal taxes only).
India: New vs. Old Tax Regime
The Indian tax system offers a choice. The Old Regime allows for numerous deductions (HRA, 80C, etc.) but has higher tax rates. The New Regime offers lower tax rates but forgoes most deductions. A take-home pay calculator is invaluable for comparing which regime is more beneficial for your specific financial situation. Generally, if you have significant investments and expenses that qualify for deductions, the Old Regime might be better. Otherwise, the simplicity and lower rates of the New Regime might be more advantageous. For official tax information, always refer to the Income Tax Department website.