Methodology Tax Year 2026–27

Last reviewed 18 August 2026 for Tax Year 2026–27

1. What the calculator does

It takes an annual CTC and a salary structure and estimates the monthly amount that would reach your bank account, after employer-side components, provident fund, Professional Tax and income tax. It shows the working at every step and lets you change any assumption.

2. What it does not do

It models ordinary salary income for a resident individual. It does not handle:

• capital gains, or any income taxed at special rates;
• business or professional income;
• foreign income, or non-resident status;
• RSUs, ESOPs and other equity compensation;
• perquisite valuation for company accommodation, cars or interest-free loans;
• arrears, relief under section 89, or mid-year job changes;
• the higher basic exemption available to senior and super-senior citizens under the old regime.

Section 87A does not apply to special-rate income, and rather than build a half-correct return engine we have kept the scope to salary. If your situation involves any of the above, this tool will understate your complexity.

3. How CTC becomes estimated take-home

In order: CTC minus employer-side components gives gross salary. Gross minus employee PF, VPF and Professional Tax, minus income tax, gives annual take-home.

4. Employer-side components

Subtracted from CTC before anything else, because they are costs your employer bears rather than salary they pay you:

• Employer PF. 12% of the PF wage, if you have indicated it sits inside your CTC.
• Gratuity provision. 4.81% of Basic + DA by default. A market convention, not a legal rate, and switchable off.
• Employer NPS. If entered, added back to salary income and then deducted under section 80CCD(2), so it is tax neutral within the cap.
• Other employer costs. Insurance, benefits, anything else you enter.

5. Employee provident fund

12% of the PF wage. The PF wage is either Basic + DA capped at the ₹15,000 statutory monthly ceiling, or the whole of Basic + DA, depending on which rule you select. Employers genuinely differ, so neither is treated as the default truth, the capped rule is preselected because it is the more common private-sector practice.

The employer's 12% is split: 8.33% of the ceiling wage (rounded to ₹1,250, as EPFO does) goes to the pension scheme, and the balance to your EPF account.

6. Professional Tax

Applied from a per-state rules table using your monthly gross salary. Where a state's rules could not be verified to our satisfaction, no amount is deducted and the result says so explicitly. Where a state does not levy it, including Odisha, which repealed it from 1 April 2026. Nothing is deducted.

Under the old regime, Professional Tax is deducted from taxable income under section 16(iii). Under the new regime it is not, because that deduction is unavailable there. It still leaves your bank account either way.

7. Income tax

Computed from versioned rules for Tax Year 2026–27:

1. Taxable income = gross salary + employer NPS − allowable deductions.
2. Slab tax, applied band by band.
3. Section 87A rebate, including the marginal relief taper above ₹12,00,000 under the new regime.
4. Surcharge where applicable, with marginal relief at each threshold.
5. Health & Education Cess at 4% on tax plus surcharge.

Marginal relief is computed on income tax, and cess is then charged on the relieved figure. That is the literal reading of the provisions, and it produces the well-known effect where the marginal rate in the relief band exceeds 100%.

8. Regime treatment

Under the new regime we allow the ₹75,000 standard deduction and employer NPS up to 14% of Basic + DA. Under the old regime: the ₹50,000 standard deduction, HRA exemption, Professional Tax, employer NPS up to 10%, and the Chapter VI-A deductions you enter: 80C (including your own PF) capped at ₹1,50,000, 80CCD(1B) at ₹50,000, 80D, and home loan interest at ₹2,00,000.

Amounts entered that the selected regime does not allow are listed separately with an explanation, rather than silently ignored.

9. Default assumptions

When you have not supplied a salary breakup, the calculator assumes Basic at 50% of CTC, no DA, HRA at 40% of Basic, PF at the statutory ceiling on both sides, employer PF inside CTC, a gratuity provision inside CTC, and no variable pay.

Basic defaults to 50% because the Code on Wages, 2019, operational from 1 April 2026, expects the wage base to be at least half of remuneration. That is a starting point, not a statistical claim about what employers do. Where your entered structure falls below the 50% line, the result says so.

10. Rounding

Calculations are carried at full precision and rounded only for display, to the nearest rupee. Taxable income is rounded to the nearest rupee before the slab calculation. EPS is rounded to the nearest rupee, matching EPFO's own treatment, which is why 8.33% of ₹15,000 appears as ₹1,250 rather than ₹1,249.50.

11. Monthly figures

Monthly take-home is annual take-home minus variable pay, divided by twelve. Variable pay is carved out because it is not paid monthly; its tax is left in the monthly figure because payroll spreads TDS across twelve payslips. So monthly × 12 + variable pay = annual take-home, exactly.

12. How the salary example pages are generated

Each page under /salary/ is a saved state of this same engine, rendered at build time by the same code the browser runs. They are not written-up examples, the numbers on a ₹15 LPA page and the numbers you get by typing ₹15,00,000 into the calculator come from the same function.

Each page also runs a sensitivity analysis at that CTC, which is where the range and the "biggest lever" figures come from.

13. Why your payslip may differ

Your employer's actual structure differs from the assumed one; TDS is uneven across the year as declarations are processed; you joined or left mid-year; there are arrears, recoveries or reimbursements; or your employer applies a policy we have not modelled. Treat this as a close estimate, and your payslip as the record.

14. How often this is reviewed

Rules are reviewed when a Finance Act, a Budget, an EPFO notification or a state amendment changes something material, and at least once a year before the start of a new tax year. The review date at the top of this page reflects a genuine review rather than a deployment.

All of it is covered by an automated test suite that checks slab boundaries, rebate and surcharge marginal relief, PF ceilings, state professional tax caps, and arithmetic invariants such as monthly × 12 reconciling to the annual figure.

Written by Divya Akash Dutta. Published 18 August 2026. Last reviewed 18 August 2026 for Tax Year 2026–27.