Frequently Asked Questions
Common questions about Indian salary calculations
What is the difference between CTC and in-hand salary?
CTC (Cost to Company) is the total amount the employer spends on you, including your salary + employer PF + gratuity + other benefits. In-hand (take-home) salary is what actually gets credited to your bank account after all deductions like employee PF, professional tax, and income tax (TDS).
Is New Tax Regime better for freshers in 2025?
Yes, for most freshers earning below ₹7 lakh, the New Tax Regime is better because the Section 87A rebate makes income tax effectively zero. Even for higher incomes, the new regime's lower slabs and ₹75,000 standard deduction often result in lower tax unless you have significant 80C investments and HRA claims.
Is PF deduction mandatory for all employees?
PF (Provident Fund) is mandatory under the EPF Act for all organizations with 20+ employees where the employee's salary is up to ₹15,000/month. For salaries above ₹15,000, the employer may still contribute on a higher base, but the statutory minimum is capped at Basic = ₹15,000 (i.e., max employer+employee PF = ₹3,600/month).
What is Section 87A and how does it work?
Section 87A is a tax rebate that effectively makes income tax zero if your net taxable income is ≤ ₹7 lakh (New Regime) or ≤ ₹5 lakh (Old Regime). The rebate amount equals the tax calculated before the rebate, capped at ₹25,000 (New Regime) or ₹12,500 (Old Regime). You don't need to apply — it's automatically given during ITR filing or TDS calculation.
Can I switch between Old and New Tax Regime every year?
Salaried employees can switch between Old and New Tax Regime every year by informing their employer at the start of the financial year. Self-employed individuals who opt out of the New Regime can only switch back once in a lifetime.
How is HRA exemption calculated?
HRA exemption under the Old Regime is the minimum of: (1) Actual HRA received, (2) 50% of Basic for metro / 40% for non-metro, or (3) Actual rent paid minus 10% of Basic. Under the New Regime, HRA exemption is not available — HRA is fully taxable.