CTC vs in-hand salary
Updated 11 October 2026
CTC (cost to company) is everything your employer spends on you in a year, including money you never see in your monthly salary, such as the employer's PF contribution and gratuity. In-hand salary is what reaches your bank account after deductions like your own PF, professional tax and income tax. On a ₹12 lakh CTC, in-hand pay is often around ₹88,000 a month, not ₹1 lakh.
What is inside CTC
| Part of CTC | Paid to you monthly? | Notes |
|---|---|---|
| Basic pay | Yes | Often 40% to 50% of CTC; PF and gratuity are based on it |
| HRA | Yes | Partly tax-free in the old regime if you pay rent |
| Special allowance and other allowances | Yes | Fully taxable in most cases |
| Employer PF contribution | No | 12% of basic + DA, or of the wage ceiling, goes to your PF account |
| Gratuity | No | Usually 4.81% of basic; paid only after qualifying service |
| Variable pay or bonus | Later | Paid quarterly or yearly, and depends on performance |
| Insurance and other benefits | No | Group health or life cover, meal cards, and similar |
The 4.81% figure for gratuity comes from the gratuity formula: 15/26 of a month's basic for each year, divided by 12 months, is about 4.81% of basic pay.
What is deducted from gross salary
- Employee PF: 12% of basic + DA. Many employers calculate it on the statutory wage ceiling instead, which rose from ₹15,000 to ₹25,000 a month on 17 September 2026. See EPF explained.
- Professional tax: up to ₹2,500 a year in states that levy it. See professional tax.
- Income tax (TDS): deducted every month based on your projected yearly income and chosen regime. See TDS on salary.
- ESI: 0.75% of gross if your gross wages are ₹21,000 a month or less.
Worked example: ₹12 lakh CTC
If the employer calculated PF on the ₹25,000 ceiling instead of the full ₹40,000 basic, both PF contributions would be ₹3,000 a month, gross pay would be higher and in-hand pay would rise by about ₹3,600 a month. See the ready-made breakdown for a ₹12 lakh CTC or run any figure in the salary calculator.
Why two people with the same CTC take home different amounts
- Salary structure: a higher basic means more PF and gratuity, so less cash now and more savings later.
- Variable pay: if 10% of CTC is a performance bonus, your monthly pay excludes it, and you may get less than the target.
- Tax regime: the new regime has lower rates and no tax up to ₹12 lakh of income (₹12.75 lakh for salaried people after the standard deduction). The old regime can work out better if you have large deductions like HRA, section 80C and home loan interest. Compare them in the income tax calculator.
- State: professional tax differs from state to state, and some states have none.
- Labour codes: since 21 November 2025, allowances above 50% of pay may be counted as wages for PF and gratuity, which can shift money from in-hand pay to savings. See labour codes and your salary.
Tips when comparing offers
- Ask for the monthly gross and the fixed part of CTC, not just the headline number.
- Check whether PF is on full basic or on the wage ceiling, and whether gratuity and insurance are inside CTC.
- Remember that employer PF and gratuity are still your money: they are paid out later, and employer PF earns interest.
- Ask how joining bonuses, retention bonuses and stock options are treated. They are often shown in the first-year CTC but do not repeat, and some must be repaid if you leave early.
- For a quick check, multiply the monthly gross by 12 and compare it with CTC. If the gap is much more than employer PF, gratuity and variable pay, ask what the rest is.