An offer letter that says ₹12 lakh CTC sounds like ₹1 lakh a month. The first salary credit is usually a surprise: often about ₹85,000. Nothing is missing. CTC and in-hand salary measure different things, and once you know what sits between them you can work out your real monthly pay before you accept an offer.
What CTC Includes
CTC (Cost to Company) is everything the employer spends on you in a year, not what you receive. It has three layers:
- Gross salary: basic pay, HRA, special allowance and other allowances. This is what your payslip starts from.
- Employer contributions: the employer's 12% share of PF, and sometimes NPS or insurance premiums. This money is yours, but it goes into your PF account, not your bank account.
- Gratuity provision: usually 4.81% of basic pay, set aside for a gratuity you receive only after five years of service (one year for fixed-term employees).
Some offers also add a performance bonus or variable pay to the CTC. That part is paid only if targets are met, so leave it out when you estimate your monthly pay.
What Comes Out of Your Gross Salary
- Employee PF: 12% of basic pay. Like the employer share, it is your savings, but it does not reach your bank account.
- Professional tax: a state tax of up to ₹2,500 a year. Maharashtra, Karnataka, West Bengal and several other states charge it; some states, such as Delhi, do not.
- Income tax (TDS): deducted every month based on your expected annual tax.
Worked Example: ₹12 Lakh CTC
Assume basic pay is 50% of CTC, which is common now that the new labour codes require basic pay and similar wages to make up at least half of total pay. The employee is under the New Tax Regime.
| Item | Per year |
|---|
| CTC | ₹12,00,000 |
| Less: employer PF (12% of ₹6,00,000 basic) | −₹72,000 |
| Less: gratuity provision (4.81% of basic) | −₹28,860 |
| Gross salary | ₹10,99,140 |
| Less: employee PF | −₹72,000 |
| Less: professional tax | −₹2,500 |
| Less: income tax | Nil |
| In-hand salary | ₹10,24,640 (about ₹85,400 a month) |
Income tax is nil because taxable income is ₹10,24,140 (gross salary minus the ₹75,000 standard deduction), which is under the ₹12 lakh rebate limit. About 85% of the CTC reaches the bank account, and most of the gap is PF, which is still your money.
In-Hand Salary at Common CTCs
Using the same assumptions (basic pay at 50% of CTC, PF on full basic, ₹2,500 professional tax, New Tax Regime with 4% cess):
| CTC | Gross salary | Income tax | In-hand per month |
|---|
| ₹8,00,000 | ₹7,32,760 | Nil | ₹56,855 |
| ₹12,00,000 | ₹10,99,140 | Nil | ₹85,387 |
| ₹15,00,000 | ₹13,73,925 | ₹77,832 | ₹1,00,299 |
| ₹20,00,000 | ₹18,31,900 | ₹1,57,435 | ₹1,29,330 |
| ₹25,00,000 | ₹22,89,875 | ₹2,63,868 | ₹1,56,126 |
The share that reaches your bank falls from about 85% at ₹12 lakh to about 75% at ₹25 lakh, as income tax starts and then grows. For how the tax itself is worked out, see our post on the New Tax Regime slabs.
Why Two Offers With the Same CTC Can Pay Differently
- PF on a capped wage. Many employers calculate PF on a wage of ₹15,000 a month, so each side contributes only ₹1,800 a month. On the ₹12 lakh example this raises in-hand pay to about ₹93,800 a month, but you save less in PF.
- Variable pay. A CTC with ₹2 lakh of bonus pays ₹2 lakh less in fixed salary, and the bonus may not be paid in full.
- Old vs New Tax Regime. If you claim large deductions such as HRA, 80C and home loan interest, the Old Regime can leave you with a different tax figure.
- Benefits counted in CTC. Insurance premiums, meal cards or a company car can be included in CTC without adding to your salary credit.
Questions to Ask Before You Accept an Offer
- What is the fixed pay, and how much of the CTC is variable?
- What percentage of CTC is basic pay?
- Is PF calculated on full basic pay or on the ₹15,000 wage ceiling?
- Are gratuity and insurance premiums included in the CTC figure?
Salary structures differ from company to company, so treat these figures as a guide. Enter the breakdown from your own offer letter in our take-home salary calculator below to see your exact monthly in-hand pay.