CTC to Gross Salary to Take-Home — How to Calculate In-Hand Salary

Updated: 3 June 2026 | Income-tax Act, 2025 | New Tax Regime & Old Tax Regime

CTC → Gross Salary: Subtract employer’s PF contribution (12% of basic) and gratuity provision (4.81% of basic).
Gross Salary → Take-Home: Subtract employee’s PF (12% of basic), professional tax (~₹200–300/month), and income tax TDS.
Rule of thumb: Take-home salary is typically 75–85% of CTC depending on your basic pay structure and income tax bracket. On a ₹15L CTC, expect roughly ₹11–12L annual take-home.

75–85%

Typical take-home as a percentage of CTC after all deductions.
Higher-CTC employees with large income tax liability may see take-home as low as 65% of CTC in the 30% tax bracket with significant perks.

The Salary Calculation Formula

Step 1 — CTC to Gross Salary

Gross Salary = CTC − Employer PF (12% of Basic) − Gratuity (4.81% of Basic)

Step 2 — Gross Salary to Net Take-Home

Take-Home = Gross Salary − Employee PF (12% of Basic) − Professional Tax (~₹2,400–2,500/yr) − Income Tax TDS

CTC Components Explained

CTC includes both cash components (paid to you) and non-cash / employer costs (not directly received). Here is a breakdown:

Component	Paid By	Taxable?	In Take-Home?
Basic Salary	Employee	Fully taxable	Yes (after TDS)
HRA (House Rent Allowance)	Employee	Partially exempt if rent paid (Section 10(13A))	Yes
Special Allowance	Employee	Fully taxable	Yes (after TDS)
LTA (Leave Travel Allowance)	Employee	Exempt twice in 4-year block (Section 10(5))	Yes (when claimed)
Employer PF Contribution (12% of Basic)	Employer cost	Exempt up to ₹7.5L combined (employer PF+NPS+gratuity)	No — not in salary
Gratuity Provision (4.81% of Basic)	Employer cost	Tax-free on exit (up to ₹20L)	No — lump sum on exit after 5 yrs
Medical Insurance (Group Health)	Employer cost	Exempt as perquisite	No — non-cash benefit
Food/Meal Coupons	Employee	Exempt up to ₹50/meal (₹26,400/yr)	Yes (non-cash / meal card)

Example: ₹15 Lakh CTC Salary Breakdown

Using a typical salary structure for a ₹15L CTC with 40% of CTC as basic pay:

Item	Annual (₹)	Monthly (₹)	Notes
CTC	15,00,000	1,25,000	Total employer cost
Less: Employer PF (12% of ₹6L basic)	− 72,000	− 6,000	Employer contribution to EPFO
Less: Gratuity (4.81% of ₹6L basic)	− 28,860	− 2,405	Provisioned; paid on exit after 5 yrs
Gross Salary	13,99,140	1,16,595	What appears on offer letter / payslip header
Less: Employee PF (12% of ₹6L basic)	− 72,000	− 6,000	Your contribution deducted from salary
Less: Professional Tax	− 2,400	− 200	State levy (Maharashtra / Karnataka etc.)
Less: Income Tax TDS (est.)	− 60,000	− 5,000	Approx. under new tax regime (no deductions)
Net Take-Home Salary	11,64,740	97,062	~77.6% of CTC

Note: This example assumes basic = ₹6L (40% of CTC), HRA = ₹3L, Special Allowance = ₹3L, and income tax under the new tax regime FY 2025-26. Actual TDS will vary based on regime, investments, and deductions claimed.

Gratuity Tip: Gratuity in CTC is a deferred benefit — it is provisioned by the employer but paid only when you leave after 5+ years. If you leave before 5 years, you forfeit the gratuity. Do not count it as accessible take-home when evaluating an offer.

New Tax Regime vs Old Tax Regime — Impact on Take-Home

The income tax regime you choose significantly affects your take-home salary. Under the new regime (default from FY 2024-25), most deductions are not available, but tax rates are lower at lower slabs.

New Regime (default): No deduction for 80C, HRA, LTA, home loan interest. Lower slab rates. Tax-free up to ₹7L (after rebate under Section 87A). Standard deduction of ₹75,000 from FY 2025-26.
Old Regime (opt-in): All deductions available (80C ₹1.5L, HRA, home loan, NPS, etc.). Better if your total deductions exceed ₹3–4L annually. Standard deduction ₹50,000.
For ₹15L CTC with no major deductions: new regime typically results in lower TDS and higher take-home.
For ₹15L CTC with home loan, 80C maxed, and HRA: old regime may result in lower total tax and slightly higher take-home.

Frequently Asked Questions

What is the difference between CTC, gross salary, and in-hand salary?

CTC (Cost to Company) is the total annual expense an employer incurs for an employee — includes salary, employer PF contribution, gratuity provision, medical insurance, and all allowances. Gross salary is CTC minus the employer's share of PF (12% of basic) and gratuity accrual (4.81% of basic) — this is what appears in your offer letter as "gross". In-hand (net take-home) salary is gross salary minus your own deductions: employee PF (12% of basic), professional tax (₹200–300/month), and income tax TDS. Typically, take-home is 75–85% of CTC.

Is variable pay included in CTC?

Yes, variable pay (performance bonus, quarterly incentive, annual bonus) is typically included in CTC as a stated component — for example, "Fixed CTC ₹12L + Variable ₹3L = Total CTC ₹15L". However, variable pay is not guaranteed — it depends on performance targets. At the time of calculating take-home salary, only the fixed component is reliable. Variable pay, when received, is fully taxable as salary income in the year of receipt.

Is ESOP (stock options) counted in CTC?

Some employers include the fair market value of ESOPs granted in the CTC figure, but this is non-cash and the actual tax event occurs when you exercise the options — at the time of allotment, the difference between FMV and exercise price is taxed as perquisite income (salary) under Section 17(2). ESOPs in CTC are aspirational projections, not guaranteed cash. When comparing offers, focus on fixed cash CTC for apple-to-apple comparison.

Is gratuity included in CTC and is it paid every year?

Gratuity is included in CTC as a provisioned cost (4.81% of basic per year), but it is NOT paid every year. Gratuity is a lump-sum amount paid at the time of leaving the company — provided you have completed at least 5 continuous years of service. The actual gratuity formula is: (15/26) × monthly basic × years of service. Despite being in your CTC, you lose this component if you leave before 5 years.

How is professional tax deducted from salary?

Professional tax is a state government levy on income. Not all states impose it — it applies in Maharashtra, Karnataka, West Bengal, Andhra Pradesh, Tamil Nadu, Gujarat, and a few others. The amount varies by state and income slab but is capped at ₹2,500 per annum (₹200–300/month in most states). Your employer deducts it from your monthly salary and remits it to the state government. Professional tax is deductible from gross salary before computing taxable income under Section 16 of the Income-tax Act.

Related Pages & Calculators

Income Tax Calculator Gratuity Calculator HRA Exemption Calculator New vs Old Tax Regime Tax on Gratuity Advance Tax Calculator

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