What Is CTC?
CTC — Cost to Company — is the total annual expenditure a company makes on you. This includes not just your salary but also contributions the company makes on your behalf that you may never see in cash.
A typical CTC includes:
- Fixed salary components (basic, HRA, allowances)
- Variable pay / performance bonus
- Employer's PF contribution (12% of basic — goes into your EPF account, not your bank)
- Gratuity (4.81% of basic — paid only after 5 years, as a lump sum)
- Superannuation (employer-funded retirement contribution — mostly seen at traditional/legacy companies, rare at startups and newer tech firms; combined with EPF and NPS, only the first ₹7.5 lakh/year of employer contribution is tax-free)
- Health insurance premium (goes to insurer, not you)
- ESIC contribution if applicable
⚠️ Variable pay is often included in CTC at 100%, but you may receive less if targets aren't met. Always ask what % of variable has been paid out in the last 3 years.
What Is In-Hand Salary?
In-hand salary (also called take-home pay or net salary) is the amount that actually credits to your bank account every month. It is calculated as:
In-hand = Gross Monthly Salary
− Employee PF (max ₹1,800)
− Income Tax / TDS
− Professional Tax (~₹200)
− Any other deductions (ESIC, loan EMIs etc.)
− Employee PF (max ₹1,800)
− Income Tax / TDS
− Professional Tax (~₹200)
− Any other deductions (ESIC, loan EMIs etc.)
Where Gross Monthly Salary = (CTC − Employer PF − Gratuity − Other CTC components) ÷ 12
What Creates the Gap Between CTC and In-Hand?
| Component | % of Basic | Goes to | When |
|---|---|---|---|
| Employer PF | 12% (max ₹1,800/mo) | Your EPF account | Monthly (accessible at retirement) |
| Gratuity | 4.81% | Gratuity fund | Lump sum after 5 years |
| Employee PF | 12% (max ₹1,800/mo) | Your EPF account | Monthly (your own savings) |
| Income Tax (TDS) | Depends on income | Government | Monthly deduction |
| Professional Tax | ~₹200/month | State government | Monthly |
| Health insurance | Varies | Insurer | Annual premium |
Examples Across Salary Levels (FY2026-27 New Regime)
| Annual CTC | Monthly Gross | Est. In-Hand | % of CTC |
|---|---|---|---|
| ₹5 LPA | ~₹38,865 | ~₹36,865 | ~88% |
| ₹8 LPA | ~₹63,264 | ~₹61,264 | ~92% |
| ₹12 LPA | ~₹95,795 | ~₹88,493 | ~88% |
| ₹20 LPA | ~₹1,60,859 | ~₹1,37,488 | ~82% |
| ₹30 LPA | ~₹2,42,188 | ~₹1,93,442 | ~77% |
The gap widens at higher salaries because income tax is progressive — higher earners lose a larger % to tax.
How to Increase In-Hand Without a Raise
You can restructure your salary to legally increase take-home without asking for a raise:
- Declare HRA exemption — If you pay rent and haven't submitted receipts to HR, you're overpaying TDS. Submit before February.
- Invest in 80C instruments — Under the old regime, ₹1.5L in ELSS/PPF/LIC reduces your taxable income by ₹1.5L. Compare both regimes first.
- NPS contribution — Additional ₹50,000 deduction under 80CCD(1B) in the old regime.
- Meal vouchers — Ask HR to add a meal card to your salary structure. Up to ₹1,05,600/year is tax-free under the Income-tax Rules, 2026, available under both regimes. See exactly how much this saves you with the Bonus Tax & Meal Card Calculator.
- Request salary restructuring — Reducing special allowance and increasing food/fuel allowances can lower your tax liability.