Salary basics
CTC vs in-hand salary
Why the salary in your offer letter is more than what reaches your bank, with a 12 LPA example.
CTC is what you cost, not what you are paid
Cost to company counts everything your employer spends on you in a year. Some of it is never paid as salary: the employer's PF contribution goes to your EPF and EPS pension accounts, and gratuity is set aside for when you leave. What is left is your gross salary. Your own PF, professional tax and income tax then come out of it.
A ₹12 lakh CTC, line by line
| A year | A month | |
|---|---|---|
| CTC | ₹12,00,000 | ₹1,00,000 |
| Less employer PF | ₹72,000 | ₹6,000 |
| Less gratuity provision | ₹28,860 | ₹2,405 |
| Gross salary | ₹10,99,140 | ₹91,595 |
| Less your PF | ₹72,000 | ₹6,000 |
| Less professional tax | ₹2,500 | ₹208 |
| Less income tax | ₹0 | ₹0 |
| In-hand salary | ₹10,24,640 | ₹85,387 |
New regime, Maharashtra, basic at 50% of CTC, HRA at 50% of basic, PF at 12% of basic from both sides, gratuity at 4.81% of basic. Taxable income is ₹10,24,140, under the ₹12 lakh rebate limit, so there is no income tax.
What changes the gap
- Basic pay: PF and gratuity are worked out on basic. A higher basic means more saved for you and less cash each month. Under the Code on Wages, if the allowances left out of "wages" are more than half of your total pay, the excess counts as wages, so PF and gratuity can be worked out on more than your basic. That is one reason this calculator starts with basic at 50% of CTC. Code on Wages, 2019 (Gazette of India).
- PF on the wage ceiling: some employers work PF out on the statutory ceiling, ₹25,000 a month from 17 September 2026, rather than full basic. That leaves more in hand.
- Variable pay: a performance bonus inside CTC is only paid if you earn it, and often once a year.
- Benefits in CTC: insurance premiums, meal cards or a car lease can be counted in CTC without being paid as salary.
- Tax regime: the old regime can mean less tax if you have large deductions such as rent, 80C savings and home loan interest.
Work out your own in-hand salary.
These figures are estimates based on the information you entered and the rules for tax year 2026-27 under the Income-tax Act 2025 as it stands after Budget 2026, EPFO notifications and state professional tax schedules. They are general information, not tax, financial or legal advice. Your actual in-hand salary can differ, for example because of your company's salary structure, variable pay, PF rules, your regime choice, TDS timing or your state. Check your payslip, or ask your payroll team or a chartered accountant, before relying on these figures.