What is CTC and In-Hand Salary?
CTC (Cost to Company) is the total amount your employer spends on you annually — including your basic salary, allowances, PF contributions, gratuity, and other benefits. Your in-hand salary (take-home pay) is what actually gets credited to your bank account after all deductions like TDS, PF, and professional tax.
The difference between CTC and in-hand salary often surprises freshers. A ₹6 LPA CTC doesn't mean ₹50,000/month in hand — the actual amount is usually ₹38,000–₹44,000 after all deductions.
How is Salary Structured in India?
A typical Indian salary breakup follows this structure: Basic Salary (40–50% of CTC) forms the foundation. HRA (House Rent Allowance) is 40–50% of basic depending on city. Special Allowance covers the remaining amount after all components. PF (Provident Fund) is 12% of basic, contributed by both employee and employer. Gratuity is 4.81% of basic, paid by the employer after 5 years of service.
New vs Old Tax Regime — Which is Better?
The New Regime (FY 2025–26) offers lower tax rates but no deductions. The Old Regime allows deductions like 80C (₹1.5L), HRA exemption, home loan interest, and more. For salaries below ₹7L, the new regime has zero tax (with rebate). For salaries above ₹15L with high deductions, the old regime may save more tax — use our calculator to compare both.
Frequently Asked Questions
Why is my in-hand salary so different from my CTC? ▾
CTC includes components that don't reach your bank account directly — like employer PF contribution (12% of basic), gratuity (4.81% of basic), and sometimes medical insurance premiums. On top of that, your employee PF (12% of basic) and income tax (TDS) are deducted monthly. Together, these can reduce your CTC by 20–30%.
What is the standard salary structure in India? ▾
Most Indian companies structure salary as: Basic (40–50% of CTC), HRA (40–50% of basic), Special Allowance (variable), Leave Travel Allowance (LTA), Medical Allowance, and employer PF + gratuity. Startups often have a simpler structure with higher special allowance for flexibility.
How is PF calculated on salary? ▾
PF is calculated at 12% of your basic salary + dearness allowance. Both you and your employer contribute 12% each. However, out of the employer's 12%, only 3.67% goes to EPF — the remaining 8.33% goes to EPS (Employee Pension Scheme), capped at ₹15,000 basic. Your total PF contribution each month is 12% of basic from your side only.
What is professional tax and who pays it? ▾
Professional tax is a state-level tax on employment income, deducted monthly from your salary. It varies by state — Maharashtra charges up to ₹200/month, Karnataka up to ₹200/month, and some states like Delhi don't levy it at all. The maximum is ₹2,500/year and it's deductible under Section 16 of the Income Tax Act.
Can I negotiate my salary structure with my employer? ▾
Yes, especially in private companies. You can often restructure to maximize tax savings — for example, increasing HRA (if you pay rent), adding LTA, phone/internet reimbursements, or NPS contribution by employer under Section 80CCD(2). These reduce your taxable income without reducing your CTC.
