CTC to In-Hand Salary: Breakup, Deductions and Example
Understand CTC, gross salary, basic, HRA, PF, gratuity, income tax and take-home salary with a clear Indian salary breakup example.
Direct answer
CTC is your employer’s total annual cost, not your bank-credited salary. In-hand salary is what remains after employer CTC components are removed and employee deductions such as PF, professional tax, income tax and other payroll deductions are subtracted.
What is CTC?
CTC stands for Cost to Company. It includes every amount the employer spends on you in a year: basic salary, allowances, employer PF, employer NPS, gratuity accrual, bonus, reimbursements and other benefits.
Because CTC includes amounts that are not paid monthly, a high CTC does not automatically mean an equally high in-hand salary.
Common CTC components
| Component | Meaning | In-hand impact |
|---|---|---|
| Basic salary | Fixed base component | Fully taxable; used for HRA and PF |
| HRA | House rent allowance | Partly exempt under old regime if rent is paid |
| Special allowance | Flexible taxable allowance | Usually fully taxable |
| Employee PF | 12% of basic in many establishments | Deducted from salary |
| Employer PF | Employer contribution | Part of CTC but not monthly in-hand |
| Gratuity accrual | Retirement/exit benefit | Often part of CTC but not paid monthly |
| Bonus / reimbursements | Performance or expense-linked payments | Depends on company policy |
Worked example
Suppose annual CTC is ₹12,00,000 and basic salary is 40% of CTC, or ₹4,80,000. The salary calculator allows you to edit every assumption; this example is illustrative only.
- Employer PF at 12% of basic = ₹57,600 per year.
- Gratuity accrual in the CTC model = basic × 15/26/12, approximately ₹23,077 per year.
- Annual gross salary after employer PF and gratuity = approximately ₹11,19,323.
- Employee PF at 12% of basic = ₹57,600 per year.
- Income tax depends on regime, HRA exemption, 80C investments and other assumptions.
The exact in-hand figure changes if HRA is exempt, if you choose the old or new tax regime, if professional tax differs by state, or if your company has a different PF policy.
Gross salary vs CTC
Gross salary is the amount payable to you before employee deductions, while CTC also includes employer-side costs. Employer PF, employer NPS and gratuity accrual can make CTC look larger than gross salary.
Assumptions and limitations
- Salary structures vary by employer, state and industry.
- Professional tax is not uniform across India; enter the amount from your payslip.
- HRA exemption is generally relevant under the old tax regime for most salaried taxpayers.
- Reimbursements, bonuses, ESOPs and special allowances need company-specific treatment.
- This guide is educational and is not payroll, tax or investment advice.
Official sources
- Income Tax Department for tax rules.
- EPFO for provident fund rules.
- Ministry of Labour & Employment for gratuity-related provisions.
Last reviewed: 24 August 2026. Current rates and rules should be verified from official sources or your payroll/CA.
Article FAQ
Is CTC equal to in-hand salary?
No. CTC includes employer contributions and future benefits. In-hand salary is after employee PF, tax, professional tax and other deductions.
Why is my gross salary lower than CTC?
Employer PF, employer NPS, gratuity accrual and other employer costs are part of CTC but not all are paid as monthly gross.
Which tax regime gives more in-hand salary?
It depends on deductions. Compare both regimes with the salary and income tax calculators using your actual payslip components.
Run the numbers yourself
Use the free SmartFintool calculators to apply this guide to your own money.