CTC to In-Hand Salary: Why Your Take-Home Is Lower
An offer letter says "₹12 lakh CTC", but your bank account receives much less each month. The gap is not a mistake. This guide shows where the money goes. You can test your own offer in the Salary In-Hand Calculator.
Key takeaways
- CTC (cost to company) is what your employer spends on you in a year, including items that never reach your bank account.
- In-hand = CTC − employer PF − employee PF − professional tax − income tax.
- Variable pay arrives once a year, so monthly pay looks lower than CTC ÷ 12.
What is inside CTC
- Basic salary: the core fixed pay. PF and gratuity are worked out on it.
- HRA: house rent allowance, partly tax-free in the old regime if you pay rent.
- Special allowance: the balance of fixed pay after other components.
- Employer PF: your employer's 12% contribution to your provident fund. It is part of CTC but is not paid to you monthly.
- Gratuity: some employers include a provision for it in CTC. Check your offer letter.
- Variable pay or bonus: often paid yearly and may depend on performance.
What gets deducted
- Employee PF: 12% of basic salary, which is your own savings, not a loss.
- Professional tax: a small state tax, deducted monthly where it applies.
- Income tax (TDS): worked out on your gross salary after the standard deduction (₹75,000 in the new regime, ₹50,000 in the old), and deducted evenly across the year.
Worked example
Assume an annual CTC of ₹12,00,000, with basic at 40% of CTC, the new tax regime, and professional tax of ₹200 a month. All fixed pay is assumed to be paid monthly.
- Basic: 40% × ₹12,00,000 = ₹4,80,000 a year (₹40,000 a month).
- Employer PF: 12% × ₹4,80,000 = ₹57,600.
- Employee PF: 12% × ₹4,80,000 = ₹57,600.
- Professional tax: ₹200 × 12 = ₹2,400.
- Gross salary: ₹12,00,000 − ₹57,600 = ₹11,42,400. After the ₹75,000 standard deduction, taxable income is ₹10,67,400.
- Income tax: taxable income is under ₹12 lakh, so the new regime rebate leaves tax at nil.
In-hand per year = 12,00,000 − 57,600 − 57,600 − 2,400 = ₹10,82,400. That is ₹90,200 a month, against ₹1,00,000 a month if you simply divided CTC by 12. The rebate depends on current rules, so check the latest rules.
Why in-hand is lower than you expect
- PF is on basic. A higher basic share means a larger PF cut and a smaller monthly credit, but more retirement savings.
- Variable pay is not monthly. If part of CTC is a bonus, it comes once a year.
- Tax is spread over the year. The monthly cut may look large.
Which regime should you pick?
The new regime is the default for salaried employees. The old regime allows deductions such as 80C, 80D and home loan interest, and HRA exemption. Compare both for your numbers in the Income Tax Calculator. For the tax-free part of rent allowance, see our guide to HRA exemption.
Try the calculator
Salary In-Hand CalculatorIncome Tax Calculator
Frequently asked questions
Is in-hand salary the same as net salary?
Yes. In-hand, take-home and net salary all mean what is credited to your bank account after deductions.
Which regime is used by default?
The new regime, which is the default for salaried employees. You can switch to the old regime and add your deductions to compare.
Does the standard deduction apply?
Yes. ₹75,000 is deducted under the new regime and ₹50,000 under the old regime before tax is worked out.
Why does my in-hand differ from the calculator?
Your employer may include other components, a different PF base or variable pay in CTC. Check your salary slip and offer letter.