CTC vs in-hand salary: what you actually take home in India
Rules and slabs assumed as of 30 October 2026; figures are illustrative. Cost to company (CTC) is the total yearly amount the employer spends on you, including items you never receive monthly, such as employer PF and gratuity. In-hand pay is what reaches your bank account after PF, tax and other deductions. In CTC vs in-hand salary terms, in-hand is typically 70 to 90 percent of CTC, depending on structure and tax.
At a glance
- CTC = fixed pay + employer contributions + variable pay + benefits. In-hand is after deductions.
- Employer PF and gratuity are inside CTC but not in your monthly credit.
- Variable pay is often not guaranteed and is paid later, after tax.
- Two offers with the same CTC can give different in-hand pay.
- Ask for the full salary breakup before you accept.
What is CTC?
CTC stands for cost to company: the total amount the employer budgets yearly for hiring you. It is often quoted in LPA, meaning lakh per annum. One lakh is 1,00,000, so 12 LPA means Rs 12,00,000 a year, or Rs 1,00,000 a month if split equally. That monthly figure is not what you receive.
What does CTC include?
| Component | What it is | In your monthly credit? |
|---|---|---|
| Basic salary | Core fixed pay, often 40 to 50 percent of CTC | Yes |
| House rent allowance (HRA) | Allowance for rent, partly tax-exempt if you pay rent | Yes |
| Special or other allowance | Balancing amount, fully taxable | Yes |
| Employer PF contribution | Employer's share (commonly 12 percent of basic; the EPFO wage ceiling for mandatory coverage rose from Rs 15,000 to Rs 25,000 a month on 17 September 2026) into your provident fund | No, goes to your PF account |
| Gratuity provision | An accrual of about 4.81 percent of basic; payable after five years of service | No, paid when you leave |
| Variable pay or bonus | Performance-linked; may be paid yearly or quarterly | Only if paid |
| Insurance and benefits | Group health cover, meal vouchers, etc. | Not as cash |
| Joining or retention bonus | One-off | Only if paid |
The employer's gratuity percentage (15 days / 26 working days, spread over 12 months, is about 4.81 percent of basic) comes from the gratuity formula under the Payment of Gratuity Act, 1972 (15 days of wages for each completed year, with 26 working days a month as the divisor). The four Labour Codes took effect on 21 November 2025 and fixed-term employees are now eligible for gratuity after one year (PIB, checked 2026-10-30).
Why is in-hand salary lower than CTC?
- Employer PF and gratuity are inside CTC but are not cash.
- Employee PF, usually 12 percent of basic, is deducted from your salary.
- Income tax (TDS) is deducted monthly by the employer based on your declared regime.
- Professional tax, in states that levy it, is a small monthly deduction.
- Variable pay is paid later or only if targets are met.
- Other deductions: insurance premiums, canteen, loans.
Worked example 1: Rs 12 lakh CTC (12 LPA)
Assumptions (illustrative, stated 30 October 2026):
- New tax regime as the default, with a standard deduction of Rs 75,000 and a tax rebate under Section 87A that makes tax nil for taxable income up to Rs 12 lakh. The slabs, Rs 75,000 standard deduction and Rs 12 lakh rebate limit are confirmed for FY 2025-26 (incometax.gov.in; PIB Budget 2025-26). The Budget speech of February 2026 does not announce a change to the personal slabs, so we apply the same figures to FY 2026-27, but the Income Tax Department had not yet published a separate FY 2026-27 slab page when we checked, and the Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026, so section numbers such as 87A have new numbers. Recheck the department's page before you rely on the numbers.
- Salary is all fixed; no variable pay.
- Basic is 40 percent of CTC. HRA is 50 percent of basic. Employer PF is 12 percent of basic, employee PF is 12 percent of basic. Gratuity is 4.81 percent of basic.
- Professional tax Rs 200 a month (Rs 2,400 a year), a typical amount in some states; it varies.
- No other deductions or investments claimed.
| Component | Annual (Rs) | Monthly (Rs) |
|---|---|---|
| CTC | 12,00,000 | 1,00,000 |
| Basic (40%) | 4,80,000 | 40,000 |
| HRA (50% of basic) | 2,40,000 | 20,000 |
| Employer PF (12% of basic) | 57,600 | 4,800 |
| Gratuity (4.81% of basic) | 23,088 | 1,924 |
| Special allowance (balance) | 3,99,312 | 33,276 |
| Gross salary (CTC minus employer PF and gratuity) | 11,19,312 | 93,276 |
Tax under the new regime (assumed):
- Taxable income = 11,19,312 minus 75,000 standard deduction = Rs 10,44,312.
- Slab tax: Rs 0 to 4,00,000 nil; 4,00,001 to 8,00,000 at 5 percent = Rs 20,000; 8,00,001 to 10,44,312 at 10 percent = Rs 24,431. Total Rs 44,431.
- Rebate under 87A (income not above Rs 12 lakh) wipes this out: tax = Rs 0.
In-hand:
| Item | Annual (Rs) |
|---|---|
| Gross salary | 11,19,312 |
| Less employee PF | 57,600 |
| Less income tax | 0 |
| Less professional tax | 2,400 |
| In-hand | 10,59,312 |
| Monthly in-hand | about 88,276 |
So a 12 LPA CTC gives roughly Rs 88,000 a month in this setup, about 88 percent of the monthly CTC. The unpaid gap is employer PF and gratuity (not cash now) and your own PF (saved, but not spendable).
Worked example 2: Rs 24 lakh CTC (24 LPA)
Same assumptions on structure, regime and professional tax.
| Component | Annual (Rs) |
|---|---|
| CTC | 24,00,000 |
| Basic (40%) | 9,60,000 |
| HRA | 4,80,000 |
| Employer PF | 1,15,200 |
| Gratuity (4.81%) | 46,176 |
| Special allowance (balance) | 7,98,624 |
| Gross salary | 22,38,624 |
Tax (new regime, assumed slabs):
- Taxable income = 22,38,624 minus 75,000 = Rs 21,63,624.
- Slabs assumed: 4 to 8 lakh at 5% = 20,000; 8 to 12 lakh at 10% = 40,000; 12 to 16 lakh at 15% = 60,000; 16 to 20 lakh at 20% = 80,000; 20 lakh to 21,63,624 at 25% = 40,906. Total = Rs 2,40,906.
- Health and education cess at 4 percent = Rs 9,636. Total tax = Rs 2,50,542. No rebate at this income. No surcharge below Rs 50 lakh.
| Item | Annual (Rs) |
|---|---|
| Gross salary | 22,38,624 |
| Less employee PF | 1,15,200 |
| Less income tax with cess | 2,50,542 |
| Less professional tax | 2,400 |
| In-hand | 18,70,482 |
| Monthly in-hand | about 1,55,874 |
At 24 LPA, in-hand is about 78 percent of the monthly CTC (Rs 2,00,000).
Notice what changes: doubling the CTC does not double the in-hand pay. At 12 LPA the Section 87A rebate cancels all tax; at 24 LPA taxable income is far above Rs 12 lakh, so the rebate no longer applies and tax is about Rs 2.5 lakh.
What changes if part of your CTC is variable?
Suppose the same Rs 12 lakh CTC includes Rs 1,20,000 as variable pay, and fixed pay is Rs 10,80,000. Monthly fixed pay falls and the variable pay, if paid, arrives later and is taxed in the year of receipt. Companies sometimes pay it at less than 100 percent depending on performance. Ask: what percentage was paid on average to people in my role last year? Do not treat the variable as guaranteed.
Old regime vs new regime: which suits you?
Under the old regime you can claim deductions such as HRA exemption, Section 80C (PF, ELSS, life insurance, home loan principal) and home loan interest. The new regime has lower slab rates and fewer deductions. People who pay high rent or have a large home loan often compare both. Use the Income Tax Department's calculator on incometax.gov.in to check your own figures (the department's e-filing portal has a tax calculator under Quick Links; https://www.incometax.gov.in). Employers usually ask you to choose a regime at the start of the year; you can still change when filing your return, subject to the rules.
Questions to ask before accepting an offer
| Question | Why it matters |
|---|---|
| Can I get the full salary breakup in writing? | Shows basic, HRA, allowances, PF, gratuity |
| What is fixed and what is variable? | Variable pay may not arrive |
| Is employer PF on the full basic or capped? | Changes CTC and in-hand |
| Is there a joining bonus with a clawback? | You may need to repay if you leave early |
| What is the notice period and buyout clause? | Affects your exit cost. See notice period guide |
| Is health insurance for family included? | A real benefit worth comparing |
How to compare two job offers
Compare in-hand fixed monthly pay, not CTC. Then add: variable pay at a realistic rate, joining bonus, PF, insurance, work-from-home costs, commute. A Rs 14 LPA offer with Rs 3 lakh variable may pay less each month than a Rs 12 LPA fixed offer. Also compare growth, stability and notice period terms. When negotiating, see how to negotiate salary for scripts you can adapt, and negotiating your notice period.
Frequently asked questions
What is the difference between CTC and in-hand salary? CTC is what the employer spends on you each year, including PF and gratuity. In-hand is what lands in your bank after deductions and tax.
How much is in-hand for 12 LPA? In our worked example, about Rs 88,000 a month under the new regime with the stated assumptions. Your figure depends on structure, regime and state.
Is PF part of CTC? Employer PF is. Your own PF is deducted from your gross salary.
Is gratuity paid every month? No. It accrues and is paid after five years of service, subject to the law.
Does variable pay count in monthly salary? Only when it is paid. Check how it is calculated.
Sources
- Income Tax Department: https://www.incometax.gov.in (accessed 30 October 2026)
- EPFO: https://www.epfindia.gov.in (accessed 30 October 2026)
- Ministry of Labour and Employment: https://labour.gov.in (accessed 30 October 2026)
Next step: Ask for the salary breakup in writing, then recalculate with your own numbers.
This is general information, not legal, tax or immigration advice. Rules change and your situation may differ. Consult a licensed attorney or qualified adviser.