- Check revised CTC on a post-tax basis to estimate monthly in-hand salary after tax deductions
- Choose between the new and old tax regimes based on potential deductions and exemptions available
- Review salary breakup including basic, HRA, allowances, employer PF, gratuity, and bonus components
Changing jobs often comes with the promise of a higher salary package. Before saying yes to a CTC, it is crucial to understand the numbers on your CTC table. From salary structure to tax regime and deductions, you must tick all the boxes.
Here are five tax-related things to check before accepting that offer:
1. Check revised CTC on a post-tax basis
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A higher CTC can push more of your income into higher tax slabs. Under the new tax regime applicable from FY 2025-26, the slabs go up to 30% for income above Rs 24 lakh. Salaried taxpayers also get a standard deduction of Rs 75,000 under the new regime.
So, don't compare your current salary and new CTC alone. Calculate the expected monthly in-hand salary after tax.
2. Choose tax regime
The new tax regime is the default setting. Eligible taxpayers can also opt for the old regime. It allows several deductions and exemptions that are restricted or unavailable under the new regime, including HRA exemption
If you claim significant deductions, compare your estimated tax liability under both regimes before making the switch.
3. Salary breakup
Two companies can offer the same CTC but give you different take-home salaries. Check the basic salary, HRA, special allowance, employer PF contribution, gratuity, bonus and other components.
A Rs 20 lakh CTC with a large variable component is not equivalent to Rs 20 lakh of fixed compensation.
4. Bonus, gratuity, leave encashment
Your exit from the current employer may trigger payments such as pending salary, bonus or leave encashment. These can have tax implications. The Income Tax Department states that leave encashment received during employment is fully taxable, while different exemption rules apply to leave encashment received at retirement.
So, before resigning, find out exactly what you will receive in your full-and-final settlement and when it will be paid.
5. Check your tax liability for the entire year
Make sure you retain your previous employer's salary and tax documents and account for income earned from both employers when calculating your annual tax liability.
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