In-hand SalaryWhat is CTC (cost to company)?
CTC stands for cost to company. It is the total amount an employer spends on one employee in a year. It is the number in most offer letters, and it is bigger than the money you receive, because part of it is paid to others or is only a promise for later.
What is inside a CTC
- Basic pay: the core of the salary, usually 40 to 50% of CTC. PF and gratuity are worked out from it.
- House rent allowance (HRA): paid to help with rent. Whether it is tax-free depends on the tax regime and on actual rent.
- Special or other allowances: the balance of the fixed pay.
- Employer PF: 12% of basic paid by the company into your provident fund account. You do not receive it monthly, but it is yours.
- Gratuity: a provision for the payment you get after five years of service.
- Variable pay, bonus and benefits: insurance, meal cards, joining or retention bonus, paid only if conditions are met.
An example: CTC of ₹10 lakh
Take a CTC of ₹10,00,000 and a basic of 40%, which is ₹4,00,000. The employer PF is ₹48,000 and the gratuity provision is ₹19,231. That leaves a gross salary of ₹9,32,769, or about ₹77,731 a month, before any deduction. From it your own PF of ₹48,000 and professional tax of ₹2,500 go, and then income tax (nil in the new regime at this level). The result is about ₹73,522 a month in hand, against ₹83,333 if you simply divided the CTC by twelve.
Gross salary is not CTC, and in-hand is not gross
It helps to keep three numbers apart: the CTC (cost to the company), the gross salary (what is paid out before deductions) and the net or in-hand salary (what reaches the bank). Compare offers on the in-hand figure and on the benefits you will really use, not on the CTC alone. An offer of a higher CTC that includes a large variable part or insurance you do not need can leave less each month.
Common questions
Is CTC the same as gross salary?
No. Gross salary is what is paid to you before deductions. CTC also includes employer contributions such as PF and the gratuity provision.
Is the in-hand salary equal to CTC divided by 12?
Never in practice. The employer's PF and gratuity are part of the CTC but not of the monthly pay, and your own PF and tax are deducted from it.
Does a variable pay count in the CTC?
Usually yes, but it is paid only if targets are met, so it is not in the fixed monthly in-hand pay this calculator shows.
- Tax slabs, rebate, surcharge and cess for tax year 2026-27: Memorandum explaining the provisions of the Finance Bill, 2026 (Ministry of Finance) and the Income Tax Department e-filing help page "Salaried Individuals for AY 2026-27". Checked on 11 November 2026.
- Gratuity formula (15 days of wages for each year of service, a month taken as 26 days): Payment of Gratuity Act, 1972, section 4(2). Employee and employer PF at 12% of wages: Employees' Provident Funds Scheme, 1952.
- PF wage ceiling of ₹25,000 a month from 17 September 2026 (Gazette notification S.O. 5109(E) under the Code on Social Security, 2020): Press Information Bureau releases on the EPFO wage ceiling (PRID 2313829, PRID 2314111). Read on 13 November 2026 (the Gazette text itself was not opened).
- Professional tax: a state tax; this page assumes ₹2,500 a year, and states differ, some charge less and some have none.
This is an estimate built on the assumptions listed on the page, with tax rates checked on 11 November 2026. It is general information, not tax or financial advice. Your own payslip can differ. Confirm tax questions at incometax.gov.in or with a professional.