How CTC becomes in-hand salary
CTC (cost to company) is everything your employer spends on you in a year. Some of it never reaches your bank account each month:
- Employer PF: 12% of basic, paid into your PF account.
- Gratuity: set aside at about 4.81% of basic, paid when you leave after five years.
- Variable pay: paid yearly or quarterly, depending on performance.
What's left is your gross salary. From that, your own PF (12% of basic), professional tax and income tax (TDS) are deducted.
In-hand = CTC − employer PF − gratuity − your PF − professional tax − income tax
For a ₹12 lakh CTC with basic at 50%, the employer and you each put ₹72,000 a year into PF, gratuity takes ₹28,860, and the in-hand salary comes to about ₹85,387 a month. Income tax is ₹0 under the new regime, because taxable income stays within the ₹12 lakh rebate.
Ways to raise your in-hand pay
Ask whether PF can be on the ₹15,000 ceiling rather than your full basic, check whether the old regime suits you if you pay rent or a home loan, and look at tax-free reimbursements your employer may offer. Remember that PF is savings, not a loss: it earns interest and is yours.
Questions people ask
Why is my in-hand so much lower than my CTC?
CTC includes money you don’t receive each month: your employer’s PF contribution, gratuity (paid when you leave after five years), and any variable pay. Your own PF, professional tax and income tax also come out of your salary.
What basic salary percentage should I use?
Check your offer letter. Under the new labour codes, basic pay plus DA should be at least half of total pay, so 50% is a common figure. A higher basic means more PF and gratuity, and a little less in hand now.
What is capped PF?
PF is compulsory only on basic pay up to ₹15,000 a month. Many employers deduct 12% of ₹15,000 (₹1,800 a month) instead of 12% of the full basic. Your offer letter or payslip will show which applies.
Is gratuity part of my CTC?
Many companies include it, at about 4.81% of basic. You get it only after five years of continuous service. If your offer letter doesn’t list gratuity in the CTC, turn it off here.
How much is professional tax?
It depends on your state, up to ₹2,500 a year. Some states, such as Delhi and Haryana, don’t charge it at all, so enter 0.
Method and sources
Basic = CTC × basic %. PF is 12% of basic (or of ₹15,000 a month if capped) from both you and the employer. Gratuity is 4.81% of basic (15/26 of a month's basic per year). Income tax uses our income tax calculator for tax year 2026-27; in the old regime, your PF counts towards the ₹1.5 lakh 80C limit and professional tax is deducted. Variable pay is shown separately from the monthly figure. How we calculate.
Last reviewed 22 Oct 2026 by the WealthFeedz team.