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How to Calculate Salary per Month with Example?

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How to Calculate Salary per Month with Example?

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It may be a cakewalk for some working professionals, but many of us still need help calculating our monthly salaries! The dizzying array of complicated terms, tax implications, and several payslip components usually stump us.

What are the Key Components of Salary?

Basic Salary

Basic pay is the fixed remuneration that you receive for services rendered to the employer. This is, arguably, the most important component of your overall salary and influences other salary heads like HRA, PF, etc. that are derived as a percentage of the basic pay. This entire amount is taxable, which is why companies try to cap it at 40 - 50% of your CTC to limit the tax liability.


Employers offer various allowances as part of the CTC. While some are directly derived from the basic salary, some are independently assigned. Some of them also offer tax exemptions, such as HRA and LTA, and help reduce your net tax payable amount. There is no fixed rule for an employer to assign some or all of the allowance heads, but here are the common ones.

  • House Rent Allowance (HRA)
  • Leave Travel Allowance (LTA)
  • Conveyance Allowance
  • Medical Allowance
  • Other Allowances 


Many companies incentivise the performance of their employees by offering annual bonuses of bi-annual/quarterly incentives. While the amount may vary based on individual performance and compensation structure, this forms a part of the annual CTC.

Indirect Benefits

Apart from the abovementioned direct payments in your salary account, an employer may offer certain other indirect benefits. These may include health insurance, meal vouchers, digital subscriptions, etc. While these form a part of your CTC and gross salary, usually, they are not considered in the net take-home salary. 


Not all salary components are paid to you, though. There are certain deductibles as well. Income tax and professional tax are deducted on your behalf and deposited with the Income Tax department via TDS. The taxes are calculated in advance based on your overall CTC, the company’s exempted allowances (such as HRA), and your individual tax saving instruments. Contributions are also made for your retirement in the form of an Employee Provident Fund and gratuity. Although you get these funds only on retirement or when leaving the job, they form a part of your CTC.

An Example on How to Calculate Monthly Salary

Before we get to the actual computation, there are two types of salary calculations; gross and net. 

  • Gross Salary – It's the sum of all your salary heads minus the EPF and Gratuity. 
  • Net Salary – It's your gross salary minus taxes deducted.

Here's an assumption of a salary structure with a CTC of ₹10,00,000. 

S. No.

Salary Component

Annual Amount 


Basic Pay

₹4,00,000 (@40% of CTC)


House Rent Allowance (HRA)

₹2,00,000 (@40% of basic)


Special allowance



Leave and Travel Allowance (LTA)



Medical Allowance



Conveyance Allowance



Provident Fund Contribution (PF)

₹48,000 @12% of basic




So, knowing what we know about gross salary now, we need to add all the components except the PF and Gratuity. Easy peasy, your gross salary in this example is ₹9,31,000 per annum. Divide this by 12, and you get a monthly gross salary of ₹77,583.33.

When you subtract the TDS deducted by the employer (as per your tax slab), you will end up with the in-hand or take-home salary.  


While the concept is simple, calculating the actual monthly salary may be challenging due to a complicated salary structure, variable allowances, company payout policies, and tax liability. Once you've figured things out, you'll need to stash it somewhere secure yet easily accessible! Fi Money, and its RBI-licensed partner Federal Bank, provide a salary account with many benefits. For starters, you get 10% of your salary as Fi-Coins — every month. You can redeem these Fi-Coins on an exclusive catalogue of rewards. Other perks include no minimum balance, a free VISA Platinum debit card with zero forex charges, priority customer service & more. That's not all! Fi will also help you manage/grow your money with features like Connected Accounts, Analyser, Goal-based saving, SIPs & automatic payments.

Frequently Asked Questions

1. How do you calculate salary?

You can calculate gross salary by adding all the components that are paid to you. These include basic pay, allowances (such as HRA, LTA, conveyance allowance, medical allowance, etc.), direct benefits (such as bonuses), and indirect benefits (such as insurance and meal vouchers). Remember to discount the contributions to EPF, gratuity, and taxes. Online salary calculators are a great tool to do this instantly with minimal manual effort.

2. What is net salary?

It's your gross salary minus the taxes deducted per your liability. The tax is usually calculated per the annual income and discounts your voluntary investments applicable for an exemption. However, employers deduct TDS monthly by calculating your yearly tax payable and dividing it by 12.

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