Having a ₹26.5 LPA (Lakhs Per Annum) is quite coveted and is usually linked to senior positions in IT, finance, consulting or any corporate leadership role. With that said, the in-hand salary is always much lower after mandatory income tax, Provident Fund (PF), and professional tax deductions.
This guide elucidates a ₹26.5 LPA salary to explain:
- Take-home monthly salary post deductions. Â
- Tax obligations for both old and new schemes. Â
- Ways to increase net pay.
Salary Structure: Key Components
A typical salary structure includes taxable and non-taxable components. Here’s a standard breakup:
| Component | Description |
| Basic Salary | Core salary (40-50% of CTC). Basis for PF and gratuity. |
| House Rent Allowance (HRA) | Partially tax-exempt if rent is paid. |
| Special Allowances | Fully taxable unless exemptions apply (e.g., LTA, meal coupons). |
| Provident Fund (PF) | 12% of Basic Salary (employee contribution). |
| Gratuity | Employer contribution (not part of in-hand salary). |
| Bonus/Incentives | Variable pay (taxable). |
Assumptions for Calculation
For simplicity, we assume the following structure for ₹26.5 LPA:
| Component | Yearly (₹) | Monthly (₹) |
| Basic Salary (40%) | 10,60,000 | 88,333 |
| HRA (20%) | 5,30,000 | 44,167 |
| Special Allowance (30%) | 7,95,000 | 66,250 |
| PF Contribution (12% of Basic) | 1,27,200 | 10,600 |
| Other Benefits (LTA, Medical) | 2,65,000 | 22,083 |
Tax Regimes in India: Old vs. New
India offers two tax regimes:
- Old Regime: Allows deductions (HRA, 80C, 80D, etc.) but has higher tax rates.
- New Regime: Offers lower tax rates but eliminates most deductions (except ₹50,000 standard deduction).
Old Tax Regime Breakdown
Step 1: Calculate Taxable Income
| Component | Amount (₹) |
| Gross Salary | 26,50,000 |
| (-) PF Contribution | 1,27,200 |
| (-) HRA Exemption | 74,004* |
| (-) Standard Deduction | 50,000 |
| (-) Section 80C | 1,50,000 |
| (-) Section 80D | 25,000 |
| Taxable Income | 22,23,796 |
HRA Exemption Calculation:
- Actual HRA: ₹5,30,000/year
- Rent Paid: ₹15,000/month (₹1,80,000/year)
- Exemption: Lowest of:
- Actual HRA: ₹5,30,000
- 50% of Basic (Metro): ₹5,30,000
- Rent Paid – 10% of Basic: ₹1,80,000 – ₹1,06,000 = ₹74,000
Step 2: Income Tax Calculation
| Income Slab | Tax Rate | Tax (₹) |
| Up to ₹2.5 Lakh | 0% | 0 |
| ₹2.5–5 Lakh | 5% | 12,500 |
| ₹5–10 Lakh | 20% | 1,00,000 |
| Above ₹10 Lakh | 30% | 3,67,139 |
| Subtotal | 4,79,639 | |
| Health & Education Cess (4%) | 19,186 | |
| Total Tax | 4,98,825 |
Step 3: Monthly In-Hand Salary
| Component | Yearly (₹) | Monthly (₹) |
| Gross Salary | 26,50,000 | 2,20,833 |
| (-) PF | 1,27,200 | 10,600 |
| (-) Income Tax | 4,98,825 | 41,569 |
| (-) Professional Tax | 2,500 | 208 |
| In-Hand Salary | 20,21,475 | 1,68,456 |
New Tax Regime Breakdown
Step 1: Calculate Taxable Income
| Component | Amount (₹) |
| Gross Salary | 26,50,000 |
| (-) Standard Deduction | 50,000 |
| Taxable Income | 26,00,000 |
Step 2: Income Tax Calculation
| Income Slab (New Regime) | Tax Rate | Tax (₹) |
| Up to ₹3 Lakh | 0% | 0 |
| ₹3–6 Lakh | 5% | 15,000 |
| ₹6–9 Lakh | 10% | 30,000 |
| ₹9–12 Lakh | 15% | 45,000 |
| ₹12–15 Lakh | 20% | 60,000 |
| Above ₹15 Lakh | 30% | 3,30,000 |
| Subtotal | 4,80,000 | |
| Health & Education Cess (4%) | 19,200 | |
| Total Tax | 4,99,200 |
Step 3: Monthly In-Hand Salary
| Component | Yearly (₹) | Monthly (₹) |
| Gross Salary | 26,50,000 | 2,20,833 |
| (-) PF | 1,27,200 | 10,600 |
| (-) Income Tax | 4,99,200 | 41,600 |
| (-) Professional Tax | 2,500 | 208 |
| In-Hand Salary | 20,21,100 | 1,68,425 |
Comparison: Old vs. New Tax Regime
| Factor | Old Regime | New Regime |
| Taxable Income | ₹22.23 Lakh | ₹26 Lakh |
| Total Tax | ₹4.98 Lakh | ₹4.99 Lakh |
| In-Hand Salary | ₹1.68 Lakh/month | ₹1.68 Lakh/month |
| Best For | High deductions (HRA, 80C) | Minimal deductions |
How to Maximize In-Hand Salary?
1. Optimize HRA Exemption
- Pay rent and declare it to your employer.
- Ensure your HRA is structured to maximize exemption.
2. Maximize Section 80C Deductions
| Investment | Max Limit (₹) |
| Employee PF | 1.5 Lakh |
| ELSS Mutual Funds | 1.5 Lakh |
| PPF | 1.5 Lakh |
3. Leverage NPS (Section 80CCD)
Extra deduction of ₹50,000 on account of 80CCD (1B).
4. Submit Leave Travel Allowance (LTA) and reimbursement of medical expenses if any.
Conclusion
Salary of ₹26.5LPA comes down to ~₹1.68 Lakh/month post tax and deductions. New regime simplifies the process while the old regime is slightly more favorable for heavy claimers. To maximize your salary:
Claim deductions under HRA, 80C, and 80D.
Put money into PPF or NPS to save on taxes.
Pro tip: get advice from a Chartered Accountant to help you with tailored tax strategies.
FAQs
What’s the in-hand salary for 26.5 LPA?
Both old and new tax regimes will get you an approximate in-hand amount of ₹1.68 Lakh after tax, PF and other deductions.
Which regime is better for 26.5 LPA?Â
If you have substantial deductions such as HRA, 80C and 80D, you might prefer the old regime.
Don’t have too many tax saving investments? Then the new regime is easier.
How much PF is deducted from 26.5 LPA?Â
12% of Basic Salary is deducted. For a basic of 88,333, this means 10,600 a month contribution to PF.
Is it possible to cut down on taxes for a salary of ₹26.5 LPA? Â
It’s possible and to achieve this goal, you need to:
- Claim HRA exemption (if renting). Â
- Max out Section 80C (₹1.5 Lakh) through PF, PPF, and ELSS. Â
- Claim NPS (additional ₹50,000 deduction under 80CCD).   Â
Is professional tax deducted from salary? Â
Yes, expect to pay around ₹200–300/month (differs by state).
