10.5 LPA In-Hand Salary Calculation After Tax, PF & Deductions

A CTC of ₹10.5 LPA job offer has just landed in your lap.  Wow, right?  But the next thought that usually comes to mind is, “All right, but how much will find its way into my bank account every month?”

This confusion often arises because CTC is the total annual expense to your employer of your job, which includes various components such as your basic salary, bonuses, Provident Fund (PF) contributions, gratuity, and statutory dues.  However, not all these components directly influence your monthly wage on hand.

This article will break down the precise split of a ₹10.5 LPA salary, point out the deductions and their justification, and help you estimate your net take-home pay after taxes, PF, and other mandatory deductions.  Let us decipher those salary slips together.

What is CTC?

Okay, let’s briefly clarify what CTC (Cost to Company) truly means before we go into the arithmetic.

CTC is simply the total amount of money a business spends on you over a year. It includes all the money your company spends on your job, not just your monthly compensation. This comprises:

• Base pay
• Allowance for House Rent (HRA)
• Extra allowances
• Extras
• Contributions to the Provident Fund (PF)
• Gratuity
• taxes (if any are paid on your behalf by the business)
• Benefits for health and insurance

The crucial point is that your in-hand income and your CTC are different. The amount that reaches your bank account each month will be somewhat less after deductions for items like income tax, your PF contribution, and professional tax (if applicable in your state).

10.5 LPA Salary Structure

To see how it is partitioned, let’s dissect a standard ₹10.5 LPA CTC structure:

Deductions Applicable

Several deductions will be in deductions from your monthly salary slip. Let’s explain them:

1. Employee Provident Fund (EPF)

• 12% of your basic salary.
• Example: 12% of ₹35,000 = ₹4,200 per month.

2. Professional Tax

• Applicable in states like Maharashtra, Karnataka, West Bengal, etc.
• Assuming that ₹200 is what it usually ranges from (typically from ₹200 to ₹250 per month), then ₹250, minus ₹5 from ₹100, would result in ₹200.

3. Income Tax (TDS – Tax Deducted at Source)

• Depending on the new or old tax regime chosen by an employee, income tax is applicable.
• We will calculate for simplicity under the new regime (FY 2024-25 slab rates).

Taxable Income = Gross Salary – Exemptions/Deductions

In the new regime, assuming no deductions under 80C/80D and excluding employer PF, gratuity, and bonus.

• Take away bonus from gross salary = ₹9,30,600.
• Standard deduction (available in the new regime from FY 2023-24): ₹50,000

Taxable income = ₹9,30,600 – ₹50,000 = ₹8,80,600

Income Tax Calculation:

• 0-3 L: Nil
• 3-6 L: ₹3,00,000 × 5% = ₹15,000
• 6-8.80 L: ₹2,80,600 × 10% = ₹28,060

Total Tax = ₹15,000 + ₹28,060 = ₹43,060

Add 4% Health and Education Cess:

• 4% of ₹43,060 = ₹1,722.4

Thus, the total payable tax is ₹43,060 per year + ₹1,722.4 = ₹44,782.4 annually

Monthly TDS = ₹44,782.4 ÷ 12 = ₹3,731.87 (approx. ₹3,732)

Monthly In-Hand Salary Calculation

Let’s now examine how this corresponds to your monthly take-home pay:

Note that bonuses (₹1,19,400) are not given monthly. They are usually published quarterly or yearly.

Annual In-Hand Salary (Fixed + Bonus)

• In-hand (×12) for the month: ₹79,418 × 12 = ₹9,53,016
• In case ₹1,19,400 to which TDS is 10 % (₹11,940) is deducted, add the yearly bonus to ₹1,07,460.

The yearly in-hand is ₹9,53,016 + ₹1,07,460 = ₹10,60,476.

Factors That Can Affect In-Hand Salary

The fluctuation of your in-hand salary might depend on:

• Location-based allowances and professional tax.
• Irrespective of the option of the old or new tax regime.
• Investments under Section 80C, 80D, 80G (if opting for the old regime as of writing).
• Depending on your company, medical reimbursements, food coupons, and LTA (Leave Travel Allowance if your company has that as well.
• Changes in tax slabs or cess by the government during the Union Budget announcements.

How to Increase Your In-Hand Salary?

Here are a few smart ways to maximize your take home salary.

• Option to choose the right tax regime: If you have saved in ELSS, PFF, or NPS, the older tax regime might save you more taxes.
• Max possible under Section 80C: Calculate the ₹1.5 lakh limit and invest it in PF, life insurance, or tax-saving mutual funds.
• Save taxes on premiums to health insurance for yourself and family: Claim medical deductions under Section 80D.
• Discuss tax-free perks: Food coupons, conveyance allowance, or mobile bill reimbursements are a few tax-free benefits that you can ask your HR about. And these can be structured into your salary, or put another way, reduce your taxable income.

Conclusion

Out of the ₹10.5 LPA CTC, your monthly in-hand salary typically ranges anywhere between ₹79,000 to ₹80,000 (based on EPF, professional tax, income tax, and other deductions, and no annual bonuses). It is easy to understand your salary breakup and taxation liabilities, which will help in better financial planning and will also open some doors to boost your take-home by making investments and tax-saving avenues.

Never sign an offer letter without asking for a salary breakup and running through these numbers yourself.

FAQs

How does 10.5 LPA translate?

So, the total cost to the company (CTC) is ₹10.5 Lakhs per annum or 10.5 LPA.  This is not your take-home pay.

How much will the in-hand salary be with an expected 10.5 LPA CTC?

A ₹10.5 LPA CTC in hand pay can be anything from ₹79,000 to ₹80,000, depending on your place of work and your tax regime.  This does not include performance-related compensation or yearly bonuses.

Is the in-hand wage inclusive of bonuses?

No, incentives are usually in the form of quarterly or yearly.  Such, the CTC does include them, but your monthly in-hand compensation set does not.

How much will I have to pay as income tax if I get that 10.5 LPA?

This particular income, if collected as tax, is ₹44,782 per annum incremental tax and cess (FY 2024–25 based on standard deductions and no other exemptions).

Is it within the law to justify the lifting of my in-hand pay?

It is possible to:

• Use it under Section 80C, 80D, e, tc,  and choose for the older tax system.
• Choose tax-free components,,e like LTA, phone reimbursements, or meal coupons.
• Take additional steps to increase the NPS, ELSS, insurance,  and such other exemptions.