How CTC becomes in-hand salary
Cost to company (CTC) is what your employer spends on you in a year. It includes things that never reach your bank account, like your employer’s PF contribution. From the rest, your own PF, professional tax and income tax are cut, and what is left is your take-home pay.
Worked example
Why in-hand is lower than you expect
- PF is on basic. A higher basic share means more PF and a smaller monthly credit, but more retirement savings.
- Variable pay is not monthly. If part of your CTC is a bonus, it comes once a year, so monthly pay is lower.
- Tax is spread over the year. Your employer deducts TDS evenly, so the monthly cut may look large.
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 above and add your deductions to compare.
Does this include the standard deduction?
Yes. ₹75,000 is deducted under the new regime and ₹50,000 under the old regime before tax is worked out.
What is the rebate under the new regime?
If your taxable income is up to ₹12 lakh, there is no income tax under the new regime. Above that, relief is given so that tax does not exceed the income above ₹12 lakh.
Why does the old regime ask for other deductions?
The old regime allows deductions like 80C, 80D and home loan interest. Your employee PF already counts towards 80C, up to ₹1.5 lakh.