How your CTC becomes in-hand salary
Your offer letter's CTC is not what you receive every month. Some parts of CTC never reach your bank account (employer PF, gratuity), and some are deducted from your gross pay (your PF, professional tax, income tax).
1. Employer contributions (inside CTC)
- Employer PF: 12% of basic salary, paid into your EPF account.
- Gratuity: about 4.81% of basic salary, paid only when you leave after qualifying service. See what you will receive with the gratuity calculator.
Taking these out of CTC gives your gross salary.
2. Deductions from gross salary
- Employee PF: 12% of basic salary. It is your savings, not a cost, but it reduces take-home pay.
- Professional tax: up to ₹2,500 a year, depending on your state.
- Income tax (TDS): spread across the year by your employer, based on the regime you choose.
3. Bonus and variable pay
If part of your CTC is a yearly bonus or performance pay, it is not paid monthly. The calculator takes it out of the monthly figure and shows it separately, after its share of income tax.
Worked example: ₹12 lakh CTC
| Component | Yearly | Monthly |
|---|---|---|
| CTC | ₹12,00,000 | ₹1,00,000 |
| Basic (50%) | ₹6,00,000 | ₹50,000 |
| Employer PF (12% of 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 | − ₹2,500 | − ₹208 |
| Income tax (new regime) | ₹0 | ₹0 |
| In-hand salary | ₹10,24,640 | ₹85,387 |
If your employer caps PF at ₹1,800 a month, the same CTC gives about ₹93,800 a month in hand, because much less goes into PF.
Monthly in-hand salary at common CTCs
Basic 50% of CTC, no bonus, full PF, gratuity in CTC, ₹2,500 professional tax, new regime:
| CTC | Income tax (yearly) | In-hand per month |
|---|---|---|
| ₹6,00,000 | ₹0 | ₹42,589 |
| ₹10,00,000 | ₹0 | ₹71,121 |
| ₹15,00,000 | ₹77,832 | ₹1,00,299 |
| ₹20,00,000 | ₹1,57,435 | ₹1,29,330 |
| ₹30,00,000 | ₹3,97,129 | ₹1,80,685 |
Tips to understand your offer
- Ask for the salary breakup, not just the CTC. Basic %, PF and variable pay change your take-home a lot.
- Variable pay is not guaranteed. If part of CTC is a performance bonus, your monthly salary will be lower than CTC ÷ 12.
- Higher PF means lower take-home but more savings. EPF earns a government-declared rate and is tax-free on withdrawal after 5 years of service.
- Save part of every raise. Increasing your investment each year as your salary grows makes a big difference; see the step-up SIP calculator.
- Planning a loan? Check that the EMI fits comfortably within your monthly in-hand pay.
- Choose the right regime. Use the income tax calculator with your real deductions, and the HRA calculator if you pay rent.
This calculator uses the regime's standard deduction, and in the old regime your employee PF under Section 80C. Other allowances, reimbursements and employer NPS are not included.
Frequently asked questions
What is the difference between CTC and in-hand salary?
CTC (cost to company) is everything your employer spends on you in a year, including their PF contribution, gratuity and sometimes insurance. In-hand salary is what reaches your bank account after your own PF contribution, professional tax and income tax are deducted.
How much PF is deducted from salary?
You contribute 12% of your basic salary to the Employees’ Provident Fund, and your employer contributes another 12%. Some employers calculate PF only on basic salary up to ₹15,000 a month, which limits each side to ₹1,800 a month.
What is gratuity and why is it in my CTC?
Gratuity is a lump sum paid when you leave a job, usually after at least 5 years of service. Many employers set aside about 4.81% of basic salary every year for it and show it in CTC, but you do not receive it monthly.
What is professional tax?
A tax on employment charged by some state governments, up to ₹2,500 a year. States such as Maharashtra, Karnataka, West Bengal and Tamil Nadu levy it; others, such as Delhi, do not.
How much tax will I pay on a ₹12 lakh CTC in 2026-27?
With basic at 50% of CTC, no bonus, PF at 12% and gratuity in CTC, gross salary is about ₹10.99 lakh. Under the new regime, taxable salary after the ₹75,000 standard deduction is below ₹12 lakh, so income tax is zero and monthly in-hand pay is about ₹85,400.
Sources
Last updated 19 September 2026. Results are estimates for planning only and are not investment, tax or legal advice. See our disclaimer.