How to Calculate Take-Home Pay in Japan: The 6 Deductions from Gross Pay and a Table by Annual Income

The six things deducted from gross pay

For company employees, the deductions column of a payslip almost always lists the following six items. The first four are social insurance premiums and the last two are taxes, and they are completely different in nature.

• Health insurance premium: insurance that keeps your share of medical costs to 30%. It is split with your employer, so the payslip shows only half.
• Nursing care insurance premium: added from the month you turn 40 until age 64. It is not deducted if you are 39 or under, or 65 or over.
• Employees’ pension premium: a nationwide rate of 18.3%. Because it is split, your share is 9.15%.
• Employment insurance premium: funds unemployment and childcare leave benefits. Your share is 0.55% (general businesses, fiscal 2025).
• Income tax: national tax on that year’s income. An estimate is withheld each month and settled in the year-end adjustment.
• Resident tax: local tax on the previous year’s income. It is deducted in 12 instalments from June to the following May.

Perhaps surprisingly, for most people the bigger burden is not tax but social insurance premiums. On an annual income of ¥5 million (under 40, Tokyo, no dependents, no bonus), social insurance premiums come to ¥721,460, while income tax and resident tax together are ¥364,000, so the premiums are nearly double.

Take-home pay table by annual income

These amounts are calculated for someone under 40, in Tokyo (health insurance rate 9.91%), with no dependents and no bonus. Resident tax is included on the assumption that the previous year’s income was the same.

The saying “take-home is 80% of gross” is roughly true around ¥4 million a year. But as income rises, the income tax rate rises too, so the rate falls to 74.3% at ¥8 million and 68.2% at ¥15 million. Conversely, at around ¥2 million it is above 80%.

Following the calculation for an annual income of ¥5 million

Take-home pay is “gross − social insurance − income tax − resident tax,” but taxes are charged on the amount after social insurance is deducted. Because the order is fixed, working through it from the top is the most reliable approach.

1. 1

   Calculate social insurance premiums (¥721,460)

   Health insurance ¥243,780, employees’ pension ¥450,180 and employment insurance ¥27,500. Health insurance and employees’ pension are the standard monthly remuneration (¥410,000 in this example) multiplied by the rate and split in half.

2. 2

   Calculate employment income (¥3.56 million)

   Subtract the employment income deduction of ¥1.44 million (¥5 million × 20% + ¥440,000) from the gross ¥5 million. This deduction acts as the “necessary expenses” of an employee.

3. 3

   Calculate taxable income for income tax (¥2,158,000)

   Subtract social insurance of ¥721,460 and the basic deduction of ¥680,000 from employment income of ¥3.56 million, and round down to the nearest ¥1,000. Income tax is ¥2,158,000 × 10% − ¥97,500 = ¥118,300; adding the 2.1% special reconstruction income tax gives ¥120,700.

4. 4

   Calculate resident tax (¥243,300)

   The basic deduction for resident tax is ¥430,000, lower than for income tax, so taxable income is ¥2,408,000. The income-based portion at 10% is ¥240,800; subtract the adjustment deduction of ¥2,500 and add the per-capita levy of ¥5,000.

5. 5

   Subtract (¥3,914,540)

   ¥5,000,000 − ¥721,460 − ¥120,700 − ¥243,300 = ¥3,914,540. Divided by 12, that is about ¥326,000 a month.

The places where hand calculations usually go wrong are that the basic deduction differs between income tax and resident tax, and that social insurance premiums are fully deductible from income. The details of how the taxes work are summarized in The difference between income tax and resident tax.

A raise doesn’t all stay in your pocket

Because the take-home rate falls as income rises, an increase in gross pay does not become take-home pay in full. Calculating how much of the increase you actually keep gives the following.

Even with a ¥500,000 raise from ¥5 million, you only take home about ¥336,000 more. When comparing job offers, look at the difference in take-home pay, not gross pay, or you will misjudge. A useful rule of thumb is that a ¥1 million difference in annual income means roughly ¥700,000 in take-home pay.

Conditions that change take-home pay on the same income

The table above uses standard conditions. The following four factors change take-home pay even on the same annual income.

The last one, the share of bonus, is easy to overlook. Even on the same annual income, changing the split between monthly pay and bonus changes the standard monthly remuneration on which social insurance is calculated, and therefore take-home pay. This is covered in detail in Take-home pay from a bonus.

At companies with their own health insurance society, the rate differs from Kyokai Kenpo, and the employer may pay more than half (making your share lighter). If you want to match the figures to your payslip, check your society’s rate.

Calculate with your own conditions in the tool

The Take-Home Pay Calculator has four tabs: annual income, monthly pay, bonus and income walls. Here is how to look things up from annual income.

1. 1

   Enter your annual income

   It reads both “500万” and “5,000,000”. If you receive a bonus, also enter the annual total and the number of payments.

2. 2

   Set your conditions

   Choose your age (whether nursing care insurance applies), the prefecture of your workplace and the number of spouses and dependents. If you have iDeCo or life insurance deductions, enter the annual amount under “Other income deductions.”

3. 3

   Check the breakdown and calculation

   The breakdown of social insurance, income tax and resident tax is shown to the yen. Open “Show how taxes are calculated” to follow the flow from the employment income deduction to taxable income in figures.

4. 4

   Compare nearby incomes in the table

   Take-home pay from ¥2 million to ¥15 million is listed side by side, so you can check in advance what your take-home will be when a raise or job change alters your income.

To check a monthly payslip, switch to the “Monthly pay to take-home” tab, which shows the deductions together with your standard monthly remuneration grade. How social insurance premiums are set is explained in How social insurance premiums are calculated, and if you are deciding whether to work within the dependent limits, see Japan’s income walls.

FAQ

What is the take-home pay on an annual income of ¥5 million?

For someone under 40, in Tokyo, with no dependents and no bonus, it is ¥3,914,540 a year (about ¥326,000 a month). The breakdown is social insurance ¥721,460, income tax ¥120,700 and resident tax ¥243,300, for a take-home rate of 78.3%. If you are 40 or over, nursing care insurance adds ¥39,108 a year, and dependents reduce your taxes, so enter your own conditions to calculate.

What percentage of gross pay is take-home pay?

For company employees it is about 75–80%. It is 81.8% at ¥2 million, 79.0% at ¥4 million, 78.3% at ¥5 million, 74.3% at ¥8 million and 68.2% at ¥15 million: the higher the income, the higher the income tax rate and the lower the take-home rate. Think of the “80% of gross” rule of thumb as applying up to around ¥4 million.

What is the formula for calculating take-home pay from gross pay?

Take-home = gross − social insurance − income tax − resident tax. The order matters: first find social insurance, then from employment income (gross minus the employment income deduction) subtract social insurance, the basic deduction and other deductions to get taxable income, and apply the tax rate to that. The basic deduction for income tax (up to ¥950,000) and for resident tax (¥430,000) differ, so taxable income is also calculated separately for each.

How much does take-home pay rise if annual income goes up by ¥1 million?

Roughly ¥650,000–700,000. For a raise from ¥5 million to ¥5.5 million, a ¥500,000 increase in gross pay raises take-home by only ¥335,794 (67.2%). In the ¥3 million range about 79% is kept, but the higher the tax rate, the smaller the share kept. Estimating with this ratio gives a realistic picture when a job change raises your income too.

Why doesn’t the result match my payslip?

There are three main reasons. Monthly income tax is an estimate from the withholding tax table and is settled in the year-end adjustment. The standard monthly remuneration on which social insurance is based is set from the April–June average, so it can differ from your actual monthly pay. And health insurance rates differ between health insurance societies. The annual totals almost match, so for monthly differences, suspect these three.