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

Last updated: 8 October 2026 · By the Asuraa Team

Quick answer: In-hand salary is CTC minus employer-side costs (employer PF, gratuity, insurance), unpaid variable pay, and your own deductions (employee PF, professional tax and TDS). EPFO sets PF at 12% of basic plus DA from both employee and employer. Under the new tax regime, salaried people get a Rs 75,000 standard deduction and pay no tax up to Rs 12 lakh of taxable income, so a Rs 6 lakh CTC can mean about Rs 44,000 a month in hand.

Key takeaways

• CTC includes employer-side costs such as employer PF, gratuity provision and insurance that never reach your monthly salary.
• According to EPFO, employees and employers each contribute 12% of basic wages plus dearness allowance to PF, calculated on a Rs 15,000 monthly ceiling for statutory purposes.
• Under the new tax regime, salaried employees get a Rs 75,000 standard deduction and pay no income tax when taxable income is Rs 12 lakh or less.
• With a Rs 20,000 monthly basic and no variable pay, a Rs 6 lakh CTC works out to about Rs 44,200 a month in hand before professional tax.
• The labour codes in force since 21 November 2025 may lead employers to raise the basic share of CTC, which raises PF and gratuity but can lower monthly take-home.

CTC (cost to company) is the total amount your employer expects to spend on you in a year. In-hand salary is what actually lands in your bank account each month. The gap between them comes from three sources: money the employer spends on your behalf (such as its PF share and gratuity), money deducted from your pay (your PF, professional tax and income tax), and pay that is not guaranteed (variable pay or bonuses).

This guide breaks down each component and walks through two worked examples. It is general information, not tax advice.

What is the difference between CTC and in-hand salary?

CTC is your employer's total annual cost for employing you, while in-hand salary is your monthly pay after all deductions. For most freshers in India, monthly in-hand pay is noticeably lower than CTC divided by 12.

A simple way to think about it:

In-hand salary = CTC - employer contributions - variable pay not yet earned - your deductions (PF, professional tax, TDS)

Every item in that equation is explained below.

What are the components of CTC?

A typical Indian CTC has a fixed salary, employer-paid benefits and, sometimes, variable pay. The names vary by company, but the structure is similar.

When you get an offer, ask for the full annual breakup. Our checklist on what to check in an offer letter covers the questions to ask.

How do PF and gratuity reduce your take-home pay?

PF reduces take-home pay twice: the employer's share is part of CTC but goes to EPFO, and your own share is deducted from your salary. According to EPFO's FAQs, both you and your employer contribute 12% of basic wages plus dearness allowance, with 8.33% of the employer's share going to the pension scheme.

Statutory contributions are calculated on a wage ceiling of Rs 15,000 a month, per EPFO. Some employers contribute only on that ceiling, which works out to Rs 1,800 a month from each side. Others contribute 12% of full basic. That one policy choice can change your take-home by thousands of rupees a month.

Gratuity is a provision for a lump sum paid when you leave after qualifying service. The common formula is last drawn basic x 15 / 26 for each year of service (ClearTax), so employers often budget about 15/26 of a month's basic per year in your CTC. You do not get this money monthly, and permanent employees usually receive nothing if they leave within five years. Our explainer on PF and gratuity for freshers covers both in detail.

What deductions come out of your monthly salary?

Three deductions usually come out of a fresher's gross monthly pay: employee PF, professional tax and income tax (TDS).

• Employee PF: 12% of basic, or Rs 1,800 if your employer uses the Rs 15,000 ceiling (EPFO).
• Professional tax: a small tax levied by some state governments on salaried employment. The amount and rules differ by state, and some states do not levy it at all. Check your state's rules or ask HR.
• TDS on salary: your employer estimates your annual income tax and deducts it in monthly instalments. The Income Tax Department notes that employees submit Form 12BB so the employer can account for claims when computing TDS (Income Tax Department).

Some employers also deduct an employee share of insurance premiums, canteen charges or ESI contributions for lower-paid staff. These appear on your payslip; see our guide on how to read a salary slip.

How do you calculate in-hand salary from CTC?

Work from CTC down to monthly take-home in six steps:

1. Remove variable pay. Subtract any performance bonus or variable component; treat it as a bonus if paid.
2. Remove employer-side costs. Subtract employer PF, gratuity provision and insurance premiums. What is left is your gross fixed salary.
3. Subtract your PF. Use 12% of basic, or Rs 21,600 a year if your employer uses the Rs 15,000 ceiling.
4. Estimate income tax. Under the new regime, subtract the Rs 75,000 standard deduction from taxable salary and apply the slabs. If taxable income is Rs 12 lakh or less, the rebate makes tax zero (Income Tax Department).
5. Subtract professional tax if your state levies it.
6. Divide by 12.

The new regime is the default unless you choose otherwise (Income Tax Department), so the examples below use it. Budget 2026-27 left the slabs and the Rs 75,000 standard deduction unchanged (Storyboard18, February 2026). Our guide to the new vs old tax regime for freshers compares both.

What is the in-hand salary for a Rs 6 lakh CTC?

Under the assumptions below, a Rs 6 lakh CTC gives roughly Rs 44,200 a month in hand, before any professional tax.

Assumptions: basic Rs 20,000 a month; employer and employee PF at 12% of full basic; gratuity provision of 15/26 of a month's basic per year; no variable pay or insurance in CTC; new tax regime; no other income.

If the same employer contributed PF only on the Rs 15,000 ceiling, both PF lines would fall to Rs 21,600 a year and monthly in-hand would rise by a few hundred rupees.

What is the in-hand salary for a Rs 18 lakh CTC?

Under the assumptions below, an Rs 18 lakh CTC gives roughly Rs 1.32 lakh a month in hand, before professional tax.

Assumptions: basic Rs 60,000 a month; PF capped at the Rs 15,000 ceiling (Rs 1,800 a month each side); gratuity provision of 15/26 of a month's basic; no variable pay; new regime; no other income.

Slab rates are from the Income Tax Department. Change any assumption and the result changes, so rerun the steps with your own breakup.

What do most guides on CTC vs in-hand salary get wrong?

Most guides use a fixed "in-hand is 70-80% of CTC" rule, but the real ratio depends on three choices you can see only in the breakup: how PF is calculated, how much is variable, and which tax regime you use. In the examples above, the same method gives about 88% for a Rs 6 lakh CTC with no variable pay, and a very different figure if 20% of CTC were variable.

A newer factor is the labour codes. The four codes took effect on 21 November 2025, with existing rules continuing during the transition (PIB). The Code on Social Security, as introduced in Parliament, defines wages so that if excluded allowances exceed half of total remuneration, the excess is counted back into wages (Code on Social Security bill text, PRS). Because PF and gratuity are calculated on wages, some employers may raise the basic share of CTC, which can lower monthly take-home while increasing PF and gratuity. Ask HR whether your structure has changed.

How should you compare two offers with different CTCs?

Compare monthly fixed take-home first, then guaranteed annual extras, then everything else. A practical order:

1. Fixed monthly in-hand under your chosen tax regime.
2. Employer PF (real savings, though locked in).
3. Guaranteed bonuses, and their clawback terms.
4. Variable pay, discounted for how reliably it is paid.
5. Gratuity, only if you expect to stay five years.
6. Insurance and other benefits.

Use the Asuraa salary research guide to check whether the fixed component is fair for the role and city, and our guide on negotiating salary as a fresher if you want to ask for a better split.

FAQ

Why is my in-hand salary less than CTC divided by 12?

Because CTC includes money that never reaches your bank account each month: the employer's PF contribution, gratuity provision, insurance premiums and any variable pay not yet earned. On top of that, your own PF contribution, professional tax where your state levies it, and monthly TDS are deducted from your gross salary before it is credited.

What is the in-hand salary for a Rs 6 lakh CTC?

It depends on the breakup. With a Rs 20,000 monthly basic, PF at 12% of full basic from both sides, a gratuity provision and no variable pay, take-home is about Rs 44,200 a month before professional tax under the new tax regime. Income tax is zero because taxable income stays well under the Rs 12 lakh rebate limit.

Is employer PF part of my salary?

It is part of your CTC but not your monthly salary. EPFO rules require the employer to contribute 12% of basic wages plus dearness allowance, with 8.33% going to the pension scheme and the rest to your EPF account. You can see the EPF portion in your UAN passbook, but you cannot spend it until withdrawal or retirement.

Does a higher basic salary reduce take-home pay?

It can. PF and gratuity are calculated on basic pay, so a higher basic increases both your PF deduction and the employer's PF cost inside a fixed CTC. That lowers monthly take-home but raises long-term savings. If your employer caps PF at the Rs 15,000 statutory ceiling, the effect on take-home is much smaller.

How is TDS on salary calculated each month?

Your employer estimates your total taxable salary for the year under your chosen regime, calculates the annual tax, and deducts it in roughly equal monthly instalments. Under the new regime, salaried people with taxable income up to Rs 12 lakh after the Rs 75,000 standard deduction have no tax, so no TDS should be deducted.

Should I count variable pay when comparing offers?

Count it separately and cautiously. Variable pay depends on your performance and company results, and its timing may be quarterly or yearly. Compare offers first on fixed monthly in-hand pay, then on guaranteed bonuses, and only then on variable pay, after asking HR what percentage was actually paid out in recent years.

Final thoughts

CTC is a cost figure, not a salary figure, so always convert an offer to monthly fixed in-hand pay before you compare or accept it. Ask for the full breakup, check how PF is calculated and how much is variable, and rerun the steps above. When you are ready for your next role, browse openings with clear salary information on Asuraa Jobs.