Salary Slip Decoded: CTC vs Gross vs In-Hand
You were offered a ₹12 lakh package, but only about ₹83,000 lands in your bank account each month — not ₹1 lakh. Where did the rest go? The answer is in the three numbers that confuse almost every salaried Indian: CTC, gross salary, and in-hand (net) salary. Once you understand how your payslip is built, you can negotiate offers better, plan taxes, and stop being surprised on payday.
The three salary numbers
- CTC (Cost to Company): The total annual cost your employer bears for you. It includes things you never see in your bank account, like the employer's PF contribution and gratuity provision.
- Gross salary: Your salary before deductions — basic + allowances. This is CTC minus the employer-only components.
- In-hand / net salary: What actually reaches your account after PF, professional tax and TDS are deducted.
The chain is: CTC → (minus employer PF, gratuity) → Gross → (minus employee PF, professional tax, TDS) → In-hand. For most people, in-hand is roughly 75–88% of CTC.
Earnings: what makes up your salary
| Component | Typical size | What it is |
|---|---|---|
| Basic salary | 40–50% of CTC | Core pay; PF, gratuity and HRA are all calculated as a % of this |
| HRA | 40–50% of basic | House Rent Allowance; partly tax-exempt under the old regime if you pay rent |
| Special allowance | Balancing figure | Fully taxable; whatever is left after other components |
| LTA, bonuses, perks | Varies | May be conditional or paid annually |
A higher basic means higher PF and gratuity (good for forced long-term savings) but a slightly lower in-hand today. A higher special allowance means more cash now but less retirement saving.
Deductions: why take-home is lower
- Employee PF (EPF): 12% of basic, deducted from your salary and parked in your retirement account. Your employer adds another 12% on top (that part sits inside CTC, not your gross).
- Professional tax: A small state-level tax, usually ₹200/month (₹2,400/year). Some states (Delhi, Haryana) don't levy it.
- TDS (Tax Deducted at Source): Your estimated annual income tax, divided across 12 months and deducted by your employer. This is the biggest variable.
To see exactly how a given CTC breaks down into monthly take-home, use our Salary Calculator — it factors in PF, professional tax, HRA and both tax regimes.
💼 Break down your CTC on the Salary Calculator →
Why two people with the same CTC take home different amounts
Two colleagues on identical ₹15 lakh CTCs can have different in-hand salaries because of:
- Salary structure: A higher basic raises PF deductions, lowering immediate cash.
- Tax regime choice: Old vs new regime changes TDS — see our regime comparison.
- Declared investments & rent: Submitting 80C proofs and HRA rent receipts lowers TDS under the old regime.
- Metro vs non-metro: HRA exemption is higher (50% of basic) in metros.
What to check on every payslip
- UAN & PF credit: Confirm your PF is actually deposited each month via the EPFO portal.
- TDS vs Form 26AS: The tax deducted should reflect in your Form 26AS / AIS — reconcile at year-end.
- Reimbursements: Some components are paid only against bills; make sure you claim them.
- Tax regime: Ensure your employer is using the regime that is cheapest for you.
Key takeaways
- CTC ≠ take-home. CTC includes employer PF and gratuity you never receive monthly.
- In-hand = gross − (employee PF + professional tax + TDS), usually 75–88% of CTC.
- A higher basic boosts retirement savings but lowers immediate cash.
- Your regime choice and declared deductions directly change your monthly TDS.