CTC vs in-hand salary: why they are different
CTC, or cost to company, is everything your employer spends on you in a year. Your in-hand salary is the part that actually reaches your bank account each month. The gap between the two is usually 15% to 30% of CTC, and it comes from two kinds of money: the employer's own contributions that sit inside your CTC but are never paid to you as salary, and the deductions taken out of your gross pay.
In-hand salary = Gross salary − Employee PF − Professional tax − Income tax (TDS)
Most of that gap is not lost. Employer and employee PF both land in your EPF account, and the gratuity provision is paid out once you complete five years with the employer. What you genuinely give up each month is professional tax and income tax.
How this calculator works
- Annual CTC. Type the figure from your offer letter. If part of it is a performance bonus, enter that separately so it is treated as yearly money, not monthly pay.
- Basic pay %. The default is 50% because the new Labour Codes, in force since 21 November 2025, require wages to be at least half of total pay, and most employers have restructured around that. Older offer letters often use 35% to 45%; change it to match yours.
- Professional tax. Pick ₹200 for most states that levy it, ₹300 for some, or None if you work in a state such as Delhi, Haryana or Uttar Pradesh.
- Tax regime. The new regime is the default. Switch to the old regime and enter your 80C, 80D and other deductions to compare.
- Read the payslip. The right-hand panel shows each component monthly and your final in-hand figure, plus the annual total.
Worked example: ₹12 lakh CTC
Take a CTC of ₹12,00,000 with basic at 50%, PF at 12% of basic and ₹200 a month professional tax.
| Component | Yearly | Monthly |
|---|---|---|
| CTC | ₹12,00,000 | ₹1,00,000 |
| Employer PF (12% of ₹6,00,000 basic) | ₹72,000 | ₹6,000 |
| Gratuity (4.81% of basic) | ₹28,860 | ₹2,405 |
| Gross salary | ₹10,99,140 | ₹91,595 |
| Employee PF | ₹72,000 | ₹6,000 |
| Professional tax | ₹2,400 | ₹200 |
| Income tax (taxable ₹10,24,140, fully rebated) | ₹0 | ₹0 |
| In-hand salary | ₹10,24,740 | ₹85,395 |
So a 12 LPA offer pays about ₹85,395 a month. For a full write-up of this and 60-plus other packages, see the LPA in-hand salary examples, for instance 12 LPA in-hand salary or 20 LPA in-hand salary.
Tax rules used for FY 2026-27
Budget 2026 kept the new-regime slabs unchanged: nil up to ₹4 lakh, then 5%, 10%, 15%, 20% and 25% in ₹4 lakh steps, and 30% above ₹24 lakh. Salaried taxpayers get a ₹75,000 standard deduction, and the Section 87A rebate of up to ₹60,000 makes taxable income up to ₹12 lakh tax-free. Just above ₹12 lakh, marginal relief caps your tax at the amount by which you cross the limit. A 4% health and education cess applies on the final tax, and surcharge starts above ₹50 lakh.
In the old regime the standard deduction is ₹50,000, professional tax is deductible, and you can claim 80C (up to ₹1.5 lakh, including your own PF), 80D, HRA exemption and home-loan interest. The salary tax calculator compares both regimes in more detail.
What changes your in-hand for the same CTC
- Basic pay share. A higher basic means more PF and gratuity, so less cash today but more saved.
- PF ceiling. Some employers calculate PF only on ₹15,000 of basic (₹1,800 a month), which raises take-home noticeably at higher salaries.
- Variable pay. A bonus inside CTC is paid once a year, if at all, so it should not be counted as monthly income.
- Insurance and perks. Group health premiums, meal cards and NPS contributions are sometimes included in CTC.
- Tax regime and declarations. Choosing the old regime without enough deductions raises TDS.
Frequently asked questions
How do I calculate in-hand salary from CTC?
Subtract employer PF, gratuity and any employer ESIC from CTC to get gross salary, then subtract employee PF, professional tax and income tax. Divide the result by 12 for the monthly in-hand figure.
What percentage of CTC is in-hand salary?
Usually 70% to 85% for salaries where the new regime keeps tax at zero, falling as tax rises. At 12 LPA with a 50% basic it is about 85%; at 30 LPA it is closer to 73%.
Is income up to ₹12 lakh tax-free in FY 2026-27?
Taxable income up to ₹12 lakh is tax-free under the new regime because of the Section 87A rebate. For a salaried person, gross salary up to ₹12.75 lakh pays no tax once the ₹75,000 standard deduction is applied.
Why is basic pay set at 50% by default?
Since the new Labour Codes took effect on 21 November 2025, wages (basic plus DA and retaining allowance) must be at least 50% of total remuneration, so most new salary structures use a basic close to 50% of CTC.
Does the calculator include ESIC?
This calculator focuses on salaries above the ESIC limit. If your gross pay is ₹21,000 a month or less, 0.75% ESIC is also deducted; the low-salary examples such as 2.5 LPA show that case.