CTC vs In-Hand Salary: How to Calculate Take-Home Pay

By MavexTech · Updated 16 October 2026 · 9 min read

Your in-hand salary is your CTC minus the employer’s own costs (employer PF and gratuity) and minus your deductions (your PF, professional tax and income tax). For a typical ₹12 lakh CTC in FY 2025-26 under the new tax regime, that works out to about ₹88,276 a month, roughly 88% of CTC.

CTC, gross salary and in-hand salary

Offer letters in India usually lead with CTC (cost to company), the total amount an employer spends on you in a year. Your bank account sees a much smaller number. Three terms explain the gap:

• CTC = everything the employer pays for you: your salary, plus the employer’s own PF contribution, gratuity provision, and sometimes insurance premiums, variable pay or one-time bonuses.
• Gross salary = CTC minus the employer-side costs that never reach your payslip as pay (employer PF, gratuity, employer-paid insurance). It is the total of basic, HRA, special allowance and other allowances.
• In-hand (net) salary = gross salary minus deductions from your pay: your own PF contribution, professional tax and income tax (TDS).

What goes into a typical CTC

Every company builds its salary structure a little differently, but most private-sector CTCs are made of the same building blocks:

The gratuity figure of 4.81% comes from the gratuity formula: 15 days’ wages for every year of service, using a 26-day month, which works out to 15 / 26 / 12 ≈ 4.81% of basic per month. Gratuity is generally payable only after five years of continuous service (except on death or disablement), so in the early years this part of CTC is a promise, not cash. Our guide on how gratuity is calculated explains it in detail.

How PF is split

Both you and your employer contribute 12% of basic pay (plus DA) to the Employees’ Provident Fund. Your 12% is deducted from your pay and goes fully to your EPF account. The employer’s 12% is split: 8.33% goes to the Employees’ Pension Scheme (EPS), capped at 8.33% of ₹15,000, which is ₹1,250 a month, and the rest goes to your EPF account. On a basic of ₹40,000, the employer’s ₹4,800 becomes ₹1,250 to EPS and ₹3,550 to EPF. The rules are published by the EPFO.

Many employers contribute only on the statutory wage ceiling of ₹15,000 (₹1,800 a month each side). Others contribute 12% of your full basic. This single choice can change your in-hand pay by thousands of rupees a month, as the examples below show.

Worked example: ₹12 lakh CTC

Take a CTC of ₹12,00,000 with a common structure: basic is 40% of CTC, HRA is 50% of basic, the employer contributes 12% of full basic to PF, gratuity is provided at 4.81% of basic, and special allowance fills the rest. Monthly figures are rounded to the nearest rupee.

Now subtract the deductions. Professional tax is a state tax capped at ₹2,500 a year; we assume ₹200 a month here, but your state’s figure may differ, and some states do not levy it at all.

Why the income tax is zero

Under the new tax regime for FY 2025-26, salaried taxpayers get a standard deduction of ₹75,000, so taxable income is ₹11,19,312 − ₹75,000 = ₹10,44,312. Taxable income up to ₹12,00,000 gets a full rebate under section 87A in the new regime, so the tax is nil. (Professional tax is not deductible in the new regime, so it does not reduce taxable income here.)

So a ₹12 lakh CTC gives about ₹88,276 a month in hand, roughly 88% of CTC. This is before any variable pay, meal cards or voluntary deductions like extra PF (VPF).

Same CTC, PF on the ₹15,000 ceiling

If the employer limits PF to 12% of ₹15,000 (₹1,800 a month each side), the employer PF inside CTC falls to ₹21,600 a year, and the freed-up ₹36,000 usually moves into special allowance. Gross salary becomes ₹11,55,312, employee PF becomes ₹21,600, and taxable income is ₹10,80,312, still under the rebate limit. In-hand pay rises to ₹11,31,312 a year, or about ₹94,276 a month, which is ₹6,000 more each month. The trade-off is a smaller retirement corpus.

Worked example: ₹20 lakh CTC

Using the same structure for a CTC of ₹20,00,000:

The income tax is worked out on the new regime slabs for FY 2025-26:

In this case in-hand pay is about ₹1,33,558 a month, around 80% of CTC. The share you take home falls as CTC rises, mainly because income tax starts to bite above the ₹12 lakh rebate limit. Under the old regime the result could be better or worse depending on your HRA, 80C and other deductions; see our guide on the new vs old tax regime.

What else can change your take-home pay

• Variable pay. If 10% to 20% of CTC is “performance linked”, you will not see it monthly, and you may not get all of it. Ask what the payout was for the last two years.
• Joining or retention bonus. Often included in “first-year CTC” but paid once, sometimes with a clawback if you leave early. Remove it when comparing offers.
• Employer-paid insurance. A group health premium in CTC is a real benefit, but it is not cash.
• Employer NPS contribution. Contributions under section 80CCD(2) can lower your tax, including in the new regime (up to 14% of basic plus DA), while reducing monthly cash.
• State. Professional tax varies by state and is up to ₹2,500 a year.
• Labour codes. The new labour codes, in force from 21 November 2025, define “wages” so that if allowances exceed half of total pay, the excess is added back when working out PF and gratuity. Some employers may restructure salaries with a higher basic, which raises PF and gratuity and can lower in-hand pay. Check how your employer applies it.

How to compare two job offers

1. Ask each employer for the full salary break-up: basic, HRA, allowances, employer PF basis (full basic or ₹15,000 ceiling), gratuity, variable pay and one-time items.
2. Remove one-time items (joining bonus, relocation) from CTC.
3. Compute the monthly in-hand for each, with the same tax regime and your real rent.
4. Add the long-term value of employer PF, NPS and gratuity separately, because they are savings, not spending money.
5. Look at the variable pay track record, not just the target.

Once you join, check your first payslip line by line against the break-up you were promised. A payslip should show each earning, each deduction and the net pay.

Frequently asked questions

This guide is general information, not financial or tax advice. Salary structures, PF policies and professional tax vary by employer and state; figures use FY 2025-26 rules.