How I Finally Stopped Undervaluing My Time: Calculate Your True Hourly Rate

Jan 3, 2026

Stop guessing your price. Learn a simple, India‑specific way to calculate your true hourly rate so you charge sustainably as a developer or freelancer.

Written by: Aanya Mehra

I used to quote hourly rates by instinct: “That sounds fair, right?” For the first year of freelancing I underpriced every single project. I had plenty of work, but no savings, no health cover, and constant churn of low‑margin clients. The turning point was an angry month when three invoices and a festival rental bill all landed at once. I stopped guessing and built a simple way to price my time that finally covered real life.

The concept is straightforward: your true hourly rate. Not just what you invoice, but the rate that accounts for taxes, non‑billable hours, benefits you no longer get from an employer, and the buffer for slow months. Here’s a pragmatic, India‑friendly method I actually used (and still use) that you can run in an hour.

Why “true hourly rate” matters

• It stops emotional pricing and price creep.
• It turns vague goals (“make ₹1.5L/month”) into concrete quotes.
• It protects you against feast‑and‑famine cycles and unexpected drains like GST payments or a broken laptop.

A simple formula true hourly rate = (desired annual take‑home + annual expenses + tax provisions + savings for benefits + buffer) / billable hours per year

Let’s break that down with real numbers.

Step 1 — pick your desired take‑home Say you want a take‑home of ₹1,50,000 per month → ₹18,00,000/year.

Step 2 — add annual business expenses Phone, internet, software, accountant, coworking, depreciation, travel: say ₹2,50,000/year.

Step 3 — provision for taxes and compliances If you’re a sole proprietor, remember:

• Income tax (individual slabs) — for ₹20L taxable, central/cess roughly 20–25% after deductions; use a conservative 25% provision.
• GST: usually added to invoices but it affects cash flow. Set aside 18% of the taxable value when you invoice (you’ll remit it later).
• TDS (if clients deduct 2–10%) reduces immediate cash — plan for 10% occasional withholding and file ITR to claim refunds later.

For simplicity, provision 25% for income tax on profit. We’ll treat GST separately as cash flow, not a permanent cost (but you must manage it). So tax provision = 25% of (take‑home + expenses) ≈ 25% of ₹20,50,000 = ₹5,12,500.

Step 4 — savings for benefits and retirement Employers often covered PF, insurance, paid leave. Build your own: health insurance ₹30,000/year, retirement savings ₹1,50,000/year → ₹1,80,000.

Step 5 — buffer for slow months and hardware A 20% buffer for slow periods, emergencies, and device replacement = 20% of (take‑home + expenses) ≈ 20% of ₹20,50,000 = ₹4,10,000.

Now add up:

• Take‑home: ₹18,00,000
• Expenses: ₹2,50,000
• Tax provision: ₹5,12,500
• Benefits: ₹1,80,000
• Buffer: ₹4,10,000 Total annual need ≈ ₹31,52,500

Step 6 — realistic billable hours You may work 40 hours/week, but meetings, admin, biz dev, and learning consume time. My observed billable rate was 50% — i.e., 20 billable hours/week. That’s about 1,000 billable hours/year (50 weeks).

So: true hourly rate = ₹31,52,500 / 1,000 ≈ ₹3,152/hour

That’s the number that changes how you quote. If a client asks for a 20‑hour package, the minimum invoice should be ₹63,040 plus GST (and you’ll still decide to discount or not).

A few practical notes and trade‑offs

• You’ll probably charge project fees, not hourly. Convert the true hourly rate into project estimates for clarity. For a fixed‑scope project, multiply estimated hours by your rate and add a small contingency.
• GST complicates the conversation. It’s fair to state “rates are exclusive of GST.” Be prepared for clients who expect you to absorb GST — decide your stance up front.
• TDS reduces your cash flow. Keep an emergency buffer of ~1–2 months of expenses.
• Expect pushback. When I raised rates to match my true hourly rate, I lost two price‑sensitive clients. The tradeoff: fewer low‑value projects, better focus, and more time for high‑margin work. That trade‑off was worth it for my sanity and savings—your mileage may vary.
• Time tracking is tedious. I track billable vs non‑billable in weekly buckets — 10 minutes at the end of the week is enough. Accurate estimates depend on honest time records.

How to start this week

1. Pick a realistic take‑home you want for the next 12 months.
2. Tally predictable expenses and benefit costs.
3. Track your time for two weeks to estimate billable hours.
4. Plug numbers into the formula and get your first true hourly rate.
5. Draft a short client script: “My standard rate is X/hr (exclusive of GST). For projects, I give a fixed price based on estimated hours.”

Final caveats The method isn’t magic. It’s conservative math that protects you from bad months and keeps compounding working for you (retirement savings, emergency funds). It won’t make you invulnerable to competition or sudden market shifts. Also, the more conservative your assumptions (lower billable hours, larger buffer), the higher the rate — and the harder it can be to find clients at the top end.

But here’s the real benefit: once you stop asking “Is ₹800 fair?” and start asking “Does this project fit my true hourly rate and goals?” negotiations get clearer, your proposals get shorter, and you stop trading away long‑term stability for short‑term busyness.

Do the math. Set a rate that actually pays your bills—literally—and you’ll sleep better when those festival bills arrive.