What is a Salary?
As many know that, a salary is the compensation received by an employee from his/her employer for the time and work he/she has contributed towards the employer’s tasks. Salary is usually paid for a cumulative period, be it hourly, daily, weekly, biweekly or monthly.
In a company, people can be employed as freelancers or as permanent employees. Freelancers may not get the usual permanent employment benefits given by companies such as bonuses, leaves, tax benefits, insurances, unemployment benefits etc. but they are likely to get a higher compensation amount when compared to the salaried employees for the same amount of work done.
A salary calculator is an online tool which calculates your salary in the units you want. Whether you want to see how much you earn in an hour or daily or weekly or monthly, a salary calculator application can calculate that for you in a span of minutes. Moreover, since such an application is also tuned in with all the local, state and national tax and levies, it calculates for you your net salary after tax deduction too. Again, you can see this result (Net Salary after tax deduction) in any unit you desire.
There are many fields in the Salary Calculator application which let one personalize and customize the results to their liking. In a salary calculator, based on the local and national rules, your working weeks, days and months are already factored in. In this calculator you can fill in the details of your savings and other tax-saving instruments too. Whatever calculation you need to do to determine your salary in the unit of your liking, this calculator will do that calculation for you.
Moreover, specialized versions of such salary calculators are also available in the market for your utilization; these are Take-Home Salary Calculators and Income Tax Calculators including many others.
It is always recommended to use a salary calculator which pertains to your country. The below example is illustrated for an Indian salary calculator application. In a salary calculator application, you will have to:
- Input your monthly basic pay.
- Input your Cost to Company (CTC).
- Input whether you work in a Metro city or not. Delhi, Chennai, Mumbai and Kolkata are usually considered metro cities in this respect.
- Input your savings, loans and other investment details.
- Input the details of the benefits i.e. conveyance allowance, medical allowance, food vouchers, Provident Fund, Leave Travel Allowance (LTA) you get in your salary.
- When you click Calculate, as per the current financial year, your taxable income, HRA and gross income is calculated.
- The Salary Calculator first calculates your Gross Salary. Please note that your Gross Salary is your Cost to Company (CTC) minus your Employer’s contribution towards Provident Fund and your Gratuity amount.
- Then the Calculator determines your Taxable Income. This Taxable Income is the result of your Gross Salary minus the Employee’s Provident Fund contribution minus the Conveyance Allowance minus the House Rent Allowance minus Leave Travel Allowance minus your Medical Bills minus the Medical Insurance minus your Tax Saving Investments minus any other deductions.
- Then the Salary Calculator application calculates your Income Tax through the application of current Income Tax rules, regulations, slabs and rates. As you know the Income Tax changes with every financial year’s budget; its newest rates are applied to the Salary calculator app.
- In the next step, the Salary Calculator app calculates your take-home salary. The Take-Home Salary is calculated by subtracting the Income Tax, the Provident Fund and the Professional Tax from your Gross Salary.
You may please note that the values received through Salary Calculator app may not match your salary slip because of the following reasons:
- If your salary structure has a Variable Pay component, then probably that Variable Pay is paid to you monthly, quarterly, bi-annually or annually. Thus in the months you are paid variable pay, your salary calculated through this application will be less than your take-home salary.
- Moreover, your Salary calculator also assumes that the Employee Provident Fund that is deducted from your salary is 12% of your basic pay and that the Gratuity is 4.81% of your salary’s basic component. If your PF deduction is not in line with the above made presumption, the salary calculated through the app will be different. Although, you can manually enter the correct deduction details for achieving accurate results.