| Scenario | Annual earnings | Replacement rate | Offsets (mo.) | Waiting (days) | Net benefit (mo.) |
|---|---|---|---|---|---|
| Standard disability | ₨ 2,400,000 | 60% | ₨ 0 | 14 | ≈ ₨ 98,400 |
| Taxable benefits with offsets | ₨ 3,000,000 | 55% | ₨ 25,000 | 30 | ≈ ₨ 90,800 |
| Partial work + cap | ₨ 4,200,000 | 65% | ₨ 0 | 7 | ≈ ₨ 132,000 |
The calculator starts by converting your pay into gross monthly earnings. Net monthly earnings are estimated by subtracting monthly pre‑tax deductions and applying an effective tax rate you provide.
- GrossMonthly = GrossAnnual ÷ 12
- NetMonthly ≈ (GrossMonthly − PreTaxDeductions) × (1 − EffectiveTaxRate)
- LostMonthly = GrossMonthly × (1 − PartialWorkPercent)
- GrossBenefit = min(LostMonthly × ReplacementRate, MonthlyCap) (cap optional)
- AfterOffset = max(GrossBenefit − Offsets, 0)
- NetBenefit = AfterOffset × (1 − BenefitTaxRate) (tax rate is 0 if tax‑free)
- COLA(t) = (1 + COLA)^(floor((t−1)/12)) applied in annual steps
- PV = Σ NetBenefit(t) ÷ (1 + MonthlyDiscount)^t
If your policy uses different definitions (e.g., average weekly wage), adjust inputs to match.
- Enter your pay details (salary or hourly), and add bonus if relevant.
- Set your effective income tax rate and any pre‑tax deductions.
- Choose a replacement rate, then add caps or offsets from your plan.
- Enter the waiting period and payment duration from policy documents.
- Optional: add COLA and a discount rate for present value.
- Click Calculate. Download the schedule as CSV or PDF if needed.
Income base and frequency
Wage replacement starts with the earnings base. Salary is usually converted to monthly pay (annual ÷ 12), while hourly pay depends on hours per week and working weeks per year. Adding bonuses can lift the base, but some plans exclude commissions or average them across 12 to 24 months. If your gross monthly earnings are ₨200,000 and you contribute ₨20,000 pre‑tax, the taxable amount becomes ₨180,000 before applying an effective tax rate.
Replacement rate and taxation
Policies often quote 50% to 70% replacement, yet “net replacement” is what pays bills. With a 60% rate on ₨200,000 gross, the gross benefit is ₨120,000. If benefits are taxable at 10%, the same payment becomes ₨108,000 net before considering offsets. Comparing net benefit plus any residual earnings against estimated net monthly earnings shows the practical replacement ratio.
Waiting period planning
Waiting periods create a predictable cash‑flow gap. Fourteen days is roughly half a month, and 30 days is about one month. If your required expenses are ₨150,000 per month, a 30‑day wait suggests keeping at least ₨150,000 to ₨300,000 in accessible reserves, depending on payment timing and medical costs. Modeling the delay also prevents overestimating first‑year totals.
Offsets, caps, and partial work
Offsets reduce benefits when other income applies. A ₨25,000 offset cuts a ₨120,000 benefit to ₨95,000, and caps can limit high earners even when the percentage is unchanged. Partial work changes the “lost earnings” base. Working 20% of normal hours means 80% is lost, so benefits fall, but combined income can improve. This calculator shows both net benefit and combined net income to support return‑to‑work decisions.
Inflation and present value
Cost‑of‑living adjustments protect purchasing power. A 3% annual step‑up raises month‑13 benefits versus month‑1. Present value discounts future net benefits using an annual rate such as 6%, converting the schedule to today’s value for comparisons. PV is helpful when choosing durations, estimating reserves, or evaluating whether supplemental coverage is cost‑effective. It also helps compare options across employers.
1) What does the replacement rate apply to?
It applies to the portion of earnings you lose. The tool estimates lost gross pay, applies your chosen rate, then adjusts for caps, offsets, and taxes to show an estimated net benefit.
2) Why is my net result lower than the policy percent?
Policies are usually stated on gross pay. Pre‑tax deductions, effective taxes, offsets, caps, and taxable benefits can reduce take‑home support. Use the net replacement ratio to compare against your net monthly earnings.
3) How do I choose an effective tax rate?
Use an average rate from recent payslips or returns, not the top bracket. If uncertain, run multiple scenarios (for example 15%, 20%, 25%) to understand sensitivity.
4) What should be entered as an offset?
Enter other monthly payments that reduce benefits, such as salary continuation, statutory programs, or settlements. If an offset is weekly, convert it to monthly using your plan’s method.
5) How does partial work change benefits?
Partial work reduces lost earnings, so the benefit base can fall. The tool also estimates residual net earnings and adds it to net benefits so you can see combined monthly income.
6) What is present value used for?
Present value discounts future net benefits to today using your annual discount rate. It helps compare durations, COLA options, or two plans that pay the same total at different times.