Calculation Methodology & Sources
Verified against Central Board of Direct Taxes (CBDT) & Ministry of Labour guidelines
1. Income Tax Calculations
Calculations reflect the amendments introduced under the Finance Act, 2024 / 2025 under Section 115BAC of the Income Tax Act, 1961.
- Standard Deduction: ₹75,000 for salaried individuals under Section 16(ia) in the New Regime (₹50,000 under the Old Regime).
- Section 87A Tax Rebate: Full rebate up to ₹25,000 for resident individuals with taxable income up to ₹7,00,000 under the New Regime (effective tax = ₹0 for gross salary up to ₹7,75,000).
- Health and Education Cess: 4% levied on aggregate of income tax and surcharge.
2. Employees' Provident Fund (EPF)
Governed by the Employees' Provident Funds and Miscellaneous Provisions Act, 1952.
- Contribution: 12% of basic wage by employee and 12% by employer.
- Wage Ceiling: The statutory wage ceiling is ₹15,000/month (producing minimum ₹1,800/month contribution), though most private employers contribute on actual basic pay unless opted out.
3. Payment of Gratuity
Governed by the Payment of Gratuity Act, 1972.
Calculated using the statutory formula: (15 × Last Drawn Basic Salary × Tenor in Years) / 26. For annual CTC decomposition, standard actuarial allocation is (15 / 26) × (Basic / 12) per year (approx 4.81% of basic salary).
4. State Professional Tax (PT)
Enacted under Article 276 of the Indian Constitution, capped at a maximum of ₹2,500 per annum per state. Rules for Gujarat, Maharashtra, Karnataka, Telangana, Tamil Nadu, and non-PT states (Delhi, UP, Rajasthan, Haryana) are modeled directly on their respective state gazettes.