In this article, we have explained how to calculate your in-hand monthly salary from CTC for Software Developer job profiles where CTC is high. CTC is in range of Rs 40,00,000 per year but you may hardly get Rs 1,00,000 per month. This makes it important to understand how to calculate your in-hand salary.

Table of contents:

1. Basics of High CTC
2. Example of Microsoft CTC

Let us get started with the basics of Calculate salary from CTC for Software Developers.

Basics of High CTC

Software Developers get jobs with high CTC while the in-hand salary is significantly less. For example, Microsoft gives offers of Rs 45 lakhs in CTC to fresher Software Developers but their in-hand salary is around 1.2 lakhs per month.

CTC is quoted before Interviews and in Campus Placements. The actual breakdown of CTC is given in the Offer Letter but it does not clearly state the in-hand salary after all deductions. If you ask HR for in-hand salary, they will never quote exact value and will give generic answer like it will vary, all details are in the offer letter and others.

CTC stand for Cost to Company.

The CTC value is high because of one-time payments like:

• Joining bonus

If you do not know, how to calculate your salary beforehand you may not be able to judge which job offer is better.

The actual CTC is the 2nd year CTC and this is important because if you make a switch / look for a new job, then this actual CTC is used to consider for new offer. The high CTC is not taken into consideration.

Example of Microsoft CTC

Let us assume the case where you get the Software Developer Job at Microsoft.

The quoted CTC is Rs 39,30,000 (~39.3 lakhs).

Base Salary: Rs 12,00,000 which is further divided into two components:

• Basic salary
• Flexible Base Plan (FBP)

Basic: Rs 4,72,000 and FBP: Rs 5,28,000

Joining bonus of Rs 3,00,000 (Rs 1,50,000 in the first month and Rs 1,50,000 after 1st year)
Stock Award: $30,000 (given over 4 years) ~ Rs 22,00,000

Relocation bonus: Rs 1,00,000 (given if you are coming from another city)
Note: This is not included in CTC so this is extra as you will get this only if you claim it.

Performance bonus: Rs 2,40,000 (20% of Base salary)
Note: 20% is the maximum if your company (Microsoft in this case) hits its overall goal. It can be less than 20% and even 0%. So, it varies.

There are other components where you can get extra money provided you claim those. These are not included in CTC. These include:

• Medical expenses (Within a given limit)
• Travel expenses

and others.

Therefore, the following components are added to arrive at the final CTC

• Base Salary: Rs 12,00,000
• Joining bonus: Rs 3,00,000
• Stock Award: Rs 22,00,000
• Performance bonus: Rs 2,40,000

This gives the CTC as Rs 39,40,000.

The following components are one-time that is these components are not considered in the CTC of your 2nd year at Microsoft. So, the 2nd year CTC is always less than the 1st year CTC:

• Joining bonus: Rs 3,00,000
• Stock Award: Rs 22,00,000

Therefore, your 2nd year CTC will be Rs 14,40,000.

Your in-hand salary will be much less. As per new income tax rules of salaried employees, the tax rules are:

Range	New tax	Old tax
Up to Rs 2.5 lakhs	0%	0%
From Rs 2.5 lakhs to Rs 5.0 lakhs	5%	5%
From Rs 5.0 lakhs to Rs 7.5 lakhs	10%	20%
From Rs 7.5 lakhs to Rs 10 lakhs	15%	20%
From Rs 10.0 lakhs to Rs 12.5 lakhs	20%	30%
From Rs 12.5 lakhs to Rs 15.0 lakhs	25%	30%
> Rs 15.0 lakhs	30%	30%

Note:

• In New tax regime, you cannot do tax saving.
• In Old tax regime, you can do tax saving like in Fixed deposit, Interest in loans and much more. This is useful only if you have to pay a large amount of interest for loans like education loan, house loan and others.

Let us calculate the minimum salary:

• You are doing no tax saving and are in New tax regime.
• You did not receive any bonus (0%).

Then, you get the base salary of Rs 12,00,000 only. On this, you pay tax of 20%.

Tax = 2.5 * 0.05 + 2.5 * 0.1 + 2.5 * 0.15 + 2 * 0.2 = 1.15

So, you pay Rs 1.15 lakhs in salary. Your in-hand salary is Rs 10.85 lakhs. So, your monthly in-hand salary is Rs 90,417.

Let us calculate maximum salary:

• Let us assume you do tax saving investments and are in Old tax regime. If you have loan and give interests, you can save tax on the interest up to FBP.

So, you have to pay tax on Basic salary of Rs 4,72,000.

Tax = 2.22 * 0.05 = Rs 11,100

You get the performance bonus of Rs 2,40,000 and tax is deducted on it. So, in-hand bonus is Rs 2,28,000.

So, in-hand salary is Rs 11,88,900 per year and it is Rs 99,000.

The bonus of Rs 2,28,000 is one-time so it is not included in monthly salary.

Therefore, your in-hand monthly salary range from Rs 90,417 to Rs 99,000.

Your 2nd year CTC / actual CTC will be Rs 14,40,000 per year and not Rs 33,40,000 per year.

To compare two offers, do the calculations are compare these values:

• In-hand monthly salary
• 2nd year CTC / Actual CTC

With this article at OpenGenus, you must have a strong idea of how to calculate your in-hand salary from CTC.