This year, salaried employees received a ‘bonus’ in their April salary from the government, as reduced tax rates under the new regime that were announced in Budget 2025 kicked in from 1 April. For salaried individuals who chose the new regime this financial year, employers will have deducted less tax at source (TDS) based on the new slab rates.
The monthly increase in salaries from this is between ₹2,900 and ₹9,100 across various income ranges. Employees with a net taxable income above ₹24 lakh will have seen a flat increase of about ₹9,100 because the top marginal rate of 30% applies to incomes above ₹24 lakh.
Net taxable income is what you’re left with after after removing all possible deductions. In a cost-to-company (CTC) figure, net taxable income comprises fixed components such as basic pay and special allowance–a direct monetary benefit that is fully taxable–and excludes variable pay or bonus, provident fund deduction, gratuity, corporate insurance premium and tax-free allowances.
The new tax regime gives better visibility over take-home pay as there are few tax-saving components such as house rent allowance (HRA), leave travel allowance (LTA), meals, and children’s education allowance in the CTC. The only tax-free allowances or reimbursements available are car lease, fuel bills, driver salary and phone bills. TDS calculation is also relatively simple in the new regime as there are very few deductions that the taxpayer can claim.
How to calculate your in-hand pay
Many salaried individuals will have switched to the new tax regime this year as the rates have been lowered considerably compared to the old regime. Here’s how you can calculate your in-hand pay from your CTC. The CTC has three parts: fixed pay, variable pay (which includes performance based bonus and stock options), and deductibles such as PF and gratuity.
Fixed pay consists of basic pay, special allowance, and tax-free allowances. Tax-free allowances available in the new regime include reimbursements on conveyance, driver salary, uniform, phone bills, car lease and gadgets. It is your fixed pay that determines your post-tax in-hand salary.
To calculate this, add the basic pay and special allowance. We’ll call this amount X. This is the amount on which tax liability and the resulting TDS is calculated. Next, deduct 12% of basic pay towards PF and TDS from X. Add your tax-free allowances or reimbursements to this and you have your take-home salary. The bonus, which is part of variable pay, is paid annually or bi-annually as a lump sum after deducting the applicable tax.
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How to calculate the increase in take-home pay
Let us understand how your in-hand salary has increased this year with an example. Say Mr A is a salaried individual with a CTC of ₹50 lakh. Based on the general CTC structure used used by the majority of employers, the breakdown looks like this: basic pay is 30%; tax-free allowances, comprising car lease and fuel reimbursements, make up 15%; and 40% is the special allowance. The rest comprises variable pay, PF contributions and gratuity.
Mr A’s net annual taxable income works out to ₹33.2 lakh. In FY25, his monthly TDS worked out to ₹55,291, so his post-tax salary was about ₹2.83 lakh, after adding tax-free allowances. But from April 2025 onwards, he has seen his take-home pay increase by about ₹9,000 a month. That’s because the monthly TDS on his net income has dropped to ₹46,125, owing to the lower income tax rates. You can find how much your own take-home salary has increased by checking the table above.
As you can see, it is your fixed pay and not your CTC that determines the tax slab you fall in. In cases where the tax-free allowances are about 15% of CTC and basic pay is 30%, annual pay packages of ₹40 lakh or more will have fixed pay in the 30% income slab. This means an annual CTC below ₹40 lakh is most likely to fall in lower tax slabs. In the new regime, the highest tax of 30% now applies to net incomes above ₹24 lakh, up from ₹15 lakh.
