Indian salary structures are built backwards from cost to company, and understanding that structure matters more here than in any other APAC jurisdiction, because the split between basic pay and allowances directly determines three separate amounts: your provident fund contribution, your gratuity accrual, and your house rent allowance exemption. A low basic component shrinks all three. Layered on top is the regime choice under section 115BAC: the new regime is now the default, offering wider slabs and a standard deduction of INR 75,000 for salaried taxpayers, but it withdraws almost every exemption that a traditionally structured Indian salary was designed around, including HRA under section 10(13A), leave travel allowance, and the section 80C deductions that make employee provident fund contributions worth claiming. Employers deduct TDS monthly under section 192 based on the regime you declare, and issue Form 16 after the year ends. This calculator models the CTC breakdown, the statutory deductions, and both regimes side by side.

Key Regulatory Parameters & Frameworks (YA 2026)

Rule 01

Provident Fund and the EPS Split

Where the Employees' Provident Funds and Miscellaneous Provisions Act applies, generally to establishments with 20 or more employees, the employee contributes 12% of basic wages plus dearness allowance and the employer matches 12%. The employer's share does not all reach your provident fund account: 8.33% of wages up to the INR 15,000 statutory wage ceiling, capped at INR 1,250 a month, is diverted to the Employees' Pension Scheme, with only the balance credited to EPF. Employers may contribute on full basic pay rather than the ceiling, and many do.

Rule 02

The House Rent Allowance Formula

Under section 10(13A) the exempt portion of HRA is the least of three amounts: the actual HRA received; 50% of salary for accommodation in Delhi, Mumbai, Kolkata, or Chennai and 40% elsewhere; and rent actually paid less 10% of salary. Salary for this purpose means basic plus dearness allowance forming part of retirement benefits plus a commission based on turnover. Rent above INR 100,000 a year requires the landlord's PAN. The exemption is unavailable entirely under the new regime.

Rule 03

Standard Deduction and What the New Regime Withdraws

The standard deduction against salary income is INR 75,000 under the new regime and INR 50,000 under the old regime for the current year. The new regime withdraws HRA, leave travel allowance, the professional tax deduction, most Chapter VI-A deductions including 80C, 80D, and 80CCD(1B), and interest on a self-occupied housing loan under section 24(b). The principal deduction it does preserve is the employer's contribution to the National Pension System under section 80CCD(2), allowed at up to 14% of salary under the new regime.

Rule 04

Gratuity Accrual

Under the Payment of Gratuity Act, gratuity becomes payable after five years of continuous service at 15 days' wages for each completed year, computed on last drawn basic plus dearness allowance using a factor of fifteen divided by twenty-six. For covered employees the exemption on receipt is capped at INR 20 lakh, aggregated across employers over a lifetime. Because the calculation runs off basic pay alone, a salary heavily weighted to allowances quietly reduces the eventual payout.

Rule 05

Professional Tax and the TDS Mechanism

Professional tax is levied by individual states, not by the Centre, on employment and professions, and is capped by Article 276 of the Constitution at INR 2,500 a year. It is deducted monthly by the employer where the state imposes it, and several states including Delhi and Haryana do not levy it at all. Separately, employers deduct TDS on salary under section 192 based on an estimate of your annual liability and the regime you declare at the start of the year, and issue Form 16 with Parts A and B by 15 June following the financial year.

Example Calculation: Tech Lead, Bangalore

Scenario Context: Resident individual with INR 1,500,000 of gross salary for FY 2025-26, taxed under the default new regime, with basic pay of INR 600,000 and employee provident fund contributions computed on the statutory ceiling.

Calculation Stage	Computed Value
Annual gross salary	INR 1,500,000
Less standard deduction under the new regime	INR 75,000
Taxable salary	INR 1,425,000, with employee EPF not deductible because 80C is unavailable under the new regime
Tax on the first INR 400,000	Nil
Tax on INR 400,000 to INR 800,000 at 5%	INR 20,000
Tax on INR 800,000 to INR 1,200,000 at 10%	INR 40,000
Tax on INR 1,200,000 to INR 1,425,000 at 15%	INR 33,750
Income tax before cess	INR 93,750
Health and education cess at 4%	INR 3,750, giving a total liability of INR 97,500
Employee EPF at 12% of the INR 15,000 ceiling	INR 21,600 a year, deducted from pay but credited to your own account

Final Deducted Result:Take-home of approximately INR 1,378,500 a year, about INR 114,875 a month, after income tax and cess of INR 97,500, employee provident fund of INR 21,600, and professional tax of up to INR 2,500 where the state levies it. The critical structural point is that employee EPF gives no deduction under the new regime, so it functions purely as forced saving rather than as a tax shelter.

Frequently Asked Questions (FAQ)

Which tax regime is better for me?▼

It turns on how much you can actually deduct. The new regime gives wider slabs, a INR 75,000 standard deduction, and a rebate that removes tax entirely up to INR 12 lakh of taxable income, but withdraws HRA, leave travel allowance, 80C, 80D, and housing loan interest. The old regime only wins where your genuine deductions are large, typically when you combine substantial HRA with a maximised 80C, 80D premiums, and section 24(b) interest on a self-occupied property. Run both, because the crossover point moves with your rent and your loan.

What is professional tax in India?▼

It is a state-level levy on employment and professions, deducted monthly by your employer where the state imposes it. Article 276 of the Constitution caps it at INR 2,500 a year across all states, and the slabs differ: Karnataka, Maharashtra, West Bengal, and Tamil Nadu levy it, while Delhi, Haryana, and Uttar Pradesh do not. It is deductible from salary income under section 16(iii) in the old regime, but that deduction is withdrawn under the new regime.

Why does my basic salary matter so much?▼

Because three separate entitlements are computed off basic pay rather than gross. Provident fund contributions are 12% of basic plus dearness allowance, gratuity accrues at fifteen days of basic per completed year, and the HRA exemption formula uses 50% or 40% of basic as one of its three limbs. A package structured with a low basic and large allowances raises immediate cash flow but reduces retirement savings, gratuity, and, in the old regime, the HRA exemption itself.

What is Form 16 and when should I receive it?▼

Form 16 is the TDS certificate your employer issues for salary. Part A, generated from the TRACES portal, records the tax deducted and deposited quarter by quarter against your PAN; Part B sets out the salary breakdown, exemptions, deductions, and the tax computed. It is due by 15 June following the end of the financial year. Cross-check it against your Form 26AS and Annual Information Statement before filing, because a mismatch between the certificate and what was actually deposited will hold up your credit.