How to calculate your salary hike
The arithmetic takes ten seconds. The part that catches people out is what happens between the percentage on the offer letter and the money that lands in their account.
The formula
Divide by the old salary. Dividing by the new one is the single most common error, and it always understates the increase. If you are going the other way — you know the percentage and want the new figure — use:
Worked example
Suppose you earn ₹12,00,000 and receive an offer of ₹15,60,000.
- Increase = ₹15,60,000 − ₹12,00,000 = ₹3,60,000
- Hike % = (3,60,000 ÷ 12,00,000) × 100 = 30%
So far so good. Now the part the offer letter does not show you.
Why your in-hand increase is smaller
Three things stand between CTC and your bank account, and all three scale with the raise.
1. Employer EPF is inside CTC but is not salary
Your CTC includes your employer's 12% provident fund contribution. On a ₹12,00,000 CTC with basic pay at 50%, that is ₹72,000 that never appears in your payslip. Your actual gross salary is ₹11,28,000.
2. Your own EPF comes off the top
You contribute another 12% of basic yourself — ₹72,000 a year here. It is still your money, but it is locked until retirement, so it is not spendable income this month.
3. The raise is taxed at your marginal rate
This is the big one. Your existing salary has already used up the lower tax slabs. The entire increase therefore sits on top, taxed at the highest rate you have reached — frequently 30% plus 4% cess. Your average tax rate might be 8%, but the tax on the increase is 31.2%.
Put together, on our ₹12,00,000 → ₹15,60,000 example the headline hike of 30% becomes a real, in-hand hike of 21.3% — monthly take-home rises from ₹87,800 to ₹1,06,512, an extra ₹18,712 a month.
Run your own numbers in the calculator →
The ₹12 lakh cliff
Under the new regime for FY 2026-27, a resident individual pays no income tax on taxable income up to ₹12,00,000, thanks to the ₹60,000 Section 87A rebate. Cross that line and the rebate disappears entirely.
To stop a single rupee of extra income triggering ₹61,500 of tax, the law provides marginal relief: your income tax is capped at the amount by which your income exceeds ₹12,00,000. But the 4% health and education cess is calculated after that cap — so inside this band every extra rupee costs ₹1.04 in tax, an effective marginal rate of 104%.
Old regime vs new regime
The new regime gives you a larger standard deduction (₹75,000 against ₹50,000) and the ₹12,00,000 rebate, but almost no other exemptions. The old regime has lower thresholds and higher rates, but lets you claim HRA, Section 80C investments, 80D health premiums and home-loan interest.
The practical rule: the old regime only wins if your total deductions are large — typically upwards of ₹4,00,000 a year once you are past ₹15 LPA. Every CTC page on this site shows the exact break-even figure for that salary, computed rather than estimated.
What counts as a good hike?
- Internal appraisal: 8–15% is typical in Indian IT. Top performers see 15–25%.
- Job switch: 20–40% is the normal band. Below 20% it is usually worth asking why.
- Promotion with a switch: 40–70% happens, particularly moving from services to product companies.
- Below ~6%: that is a real-terms pay cut once inflation is accounted for.
A checklist before you accept
- Convert both offers to the same basis — CTC to CTC, not CTC to gross.
- Ask for the salary structure, not just the total. The basic/allowance split changes your EPF and your tax.
- Check whether variable pay is included in the CTC figure and what the historical payout percentage has been.
- Work out the monthly in-hand for both, not the annual CTC.
- Re-run the regime comparison at the new salary.
- Factor in one-time costs: notice-period buyout, relocation, lost gratuity if you leave before five years.
Frequently asked questions
What is the formula for salary hike percentage?
Hike % = ((New CTC − Old CTC) ÷ Old CTC) × 100. Always divide by the old salary, not the new one — dividing by the new salary is the most common mistake and understates the hike.
How do I calculate my new salary after a percentage hike?
New CTC = Old CTC × (1 + hike ÷ 100). A 25% hike on ₹10,00,000 is 10,00,000 × 1.25 = ₹12,50,000.
Is a 30% hike good in India?
For a job switch, 30% is around the market norm in Indian tech — switches typically fetch 20–40%. For an internal appraisal, 30% is exceptional; 8–15% is the usual range. But the headline figure matters less than the in-hand change, which is always smaller.
How do I calculate a hike when I only know the monthly salary?
Multiply the monthly figure by 12 to get the annual figure first, then apply the same formula. Be careful that you are comparing like with like — monthly in-hand and monthly gross are different numbers, and CTC is different again.
Does a salary hike change my tax regime choice?
It can. The old regime becomes relatively more attractive as your deductions grow in proportion to income, while the new regime tends to win at most salary levels for people without large HRA or 80C claims. Because the comparison depends on your new income, it is worth re-checking after every raise.