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Let's assume that this question is asked when they've pretty much made you an offer and you're talking terms and conditions.
A loaded question, you will probably lose if you answer first. So, do not answer it. Instead, say something like, That's a tough question. Can you tell me the offer you making?
If you're disappointed by the starting salary, don't just accept their first bid if you think it's less than it should be. 'Well, that base salary is below my expectation. I don't want to reject it out of hand; but I'll need to think about it. Could I ask if you have any flexibility in this area'?
If you are a fresher, the simple response is "As per your company policy!". But in case of persons with work experience; then you may state that your last drawn salary was so much and you are expecting an 'x" % increase. That X depends on your confidence and your need for the job change.
Salary expectation can be asked not only during interview it can be used at different moments.
Your answer should reflect your research skills and also your commercial awareness about the Industry in which you are planning to work in.
Always do you homework before answering this question.
You need to check on companies in similar space i.e competitors, company growth and profits along with share prize.
This will ensure that you have a rough idea on what is market offering and then present your prize in the range you expect.
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