CTC to in-hand salary: exactly where the money goes, with a worked example

"What will my in-hand salary be?" is asked millions of times a year in India, usually right after an offer letter lands. The gap between CTC and take-home confuses people because CTC includes money you never see monthly — the employer's PF share, gratuity provision, insurance premiums — and take-home is reduced by deductions that are yours but delayed (your PF) or gone (tax).

The anatomy of a CTC

CTC = Gross salary + Employer contributions + Benefits

• Gross salary = basic + DA + HRA + special/other allowances + (sometimes) variable pay
• Employer contributions = employer PF (12% of basic, up to a wage ceiling in some companies) + ESI (3.25% if gross ≤ ₹21,000) + gratuity provision (4.81% of basic)
• Benefits = health insurance premium, meal cards, phone, etc.

In-hand = Gross − employee PF (12% of basic) − professional tax − income tax (TDS) − other deductions

The 50% rule since the Labour Codes

From November 2025, "wages" (basic + DA) must be at least 50% of total remuneration. Employers that kept basic at 30–40% have restructured. Effect: higher PF both sides, higher gratuity, slightly lower in-hand, larger retirement corpus. See the labour code changes.

Worked example: ₹9,00,000 CTC, Maharashtra, new tax regime

Why zero tax: gross ₹8,48,700 − standard deduction ₹75,000 = ₹7,73,700 taxable → slab tax ₹18,685 → the Section 87A rebate (income ≤ ₹12 lakh) wipes it out. At a ₹15 lakh CTC the same structure carries about ₹6,900 of monthly TDS. Run your own numbers in the in-hand salary calculator; it applies the rebate, PT slabs and the 50% wage rule automatically.

Each deduction explained

Employee PF — 12% of basic

Yours, invested at 8.25%, tax-free after 5 years. Employers may cap it at the statutory wage ceiling — ₹25,000 basic (₹3,000/month) from 17 September 2026, previously ₹15,000 — check your structure.

Professional tax — up to ₹2,500 a year

A state levy (Maharashtra ₹200/month, Karnataka ₹200 above ₹25,000, none in Delhi/UP/Haryana). Deductible from taxable income under the old regime. See state slabs.

TDS — income tax deducted monthly

Your employer estimates annual tax from your declared regime and investments and deducts 1/12 each month. New regime: zero up to ₹12.75 lakh gross for salaried. Compare with the old vs new calculator.

ESI — 0.75% of gross if gross ≤ ₹21,000

Medical cover for lower-wage employees; employer pays 3.25%.

Things that are in CTC but never in your account

• Employer PF (12%) — in your PF account.
• Gratuity (4.81% of basic) — paid only if you complete 5 years (1 year for fixed-term staff). Gratuity rules.
• Insurance premiums, meal cards, gym — benefits, not cash.
• Variable pay — paid quarterly/annually, if targets are met. Don't count it in monthly budgeting.

Negotiating for higher take-home

• Ask for a lower variable share and higher fixed.
• Ask whether employer PF is inside or outside CTC — outside is worth 12% of basic more.
• Check if NPS employer contribution (80CCD(2)) is offered — it is tax-deductible even in the new regime.
• Ask for allowances that are reimbursable and tax-free (phone, internet, books) where the company permits.

FAQ

Why is my in-hand lower than CTC ÷ 12?

CTC includes employer PF, gratuity and benefits that are not paid monthly, and take-home is after your PF, professional tax and TDS.

Is HRA fully taxable?

Under the old regime, part of HRA is exempt if you pay rent. Under the new regime, HRA is fully taxable but the lower slabs usually compensate.

Does variable pay attract PF?

No — PF applies to basic + DA (and, under the Labour Codes, any allowances that push non-wage components above 50%).

How do I check my employer's PF deposits?

Log in to the EPFO member portal or the UMANG app; the passbook shows monthly credits for both shares.