CTC → Gross: subtract the employer's PF contribution (12% of basic) and the gratuity provision (4.81% of basic). Gross → Take-Home: subtract your own EPF (12% of basic), professional tax (up to Rs 2,500/year) and income-tax TDS. As a rule of thumb, net take-home is about 75–85% of CTC — on a Rs 15 lakh CTC, expect roughly Rs 11–12 lakh a year in hand, depending on your basic structure and tax regime.
CTC bundles cash you receive (basic, HRA, allowances) with employer-borne costs you never see in your bank account (employer PF, gratuity provision, group medical insurance). Two offers with the same CTC can give very different take-home depending on how much is basic, how much is employer PF/gratuity, and whether you pick the new or old regime.
CTC Components — Cash, Perks & Employer Costs
CTC has cash components paid to you and non-cash / employer-cost components that never reach your account. Taxability is shown for FY 2025-26; most salary exemptions (HRA, LTA) apply only under the old regime.
| Component | Type | Taxable? | In take-home? |
|---|---|---|---|
| Basic salary | Cash | Fully taxable | Yes |
| HRA (House Rent Allowance) | Cash | Exempt u/s 10(13A) — old regime only | Yes |
| LTA (Leave Travel Allowance) | Cash | Exempt u/s 10(5), 2 trips / 4-yr block — old only | Yes |
| Special allowance | Cash | Fully taxable | Yes |
| Employer PF (12% of basic) | Employer cost | Exempt unless employer PF+NPS+super > Rs 7.5L/yr | No |
| Gratuity provision (4.81% of basic) | Employer cost | Exempt on exit up to Rs 20L u/s 10(10) | No |
| Group medical insurance | Employer cost | Exempt perquisite | No |
| Meal coupons | Non-cash | Exempt up to Rs 50/meal (Rule 3) | Yes |
HRA and LTA exemptions are NOT available in the default new regime. Standard deduction: Rs 75,000 (new) / Rs 50,000 (old) u/s 16.
The CTC → Gross → Take-Home Formula
Two deductions convert CTC into gross, then three convert gross into your in-hand pay.
CTC → Gross salary
- Start with total CTC
- Less employer PF: 12% of basic
- Less gratuity provision: 4.81% of basic
- = Gross salary (offer-letter figure)
Gross → Net take-home
- Start with gross salary
- Less employee EPF: 12% of basic
- Less professional tax: up to Rs 2,500/yr
- Less income-tax TDS u/s 192
- = Net in-hand salary
The gratuity provision (4.81% of basic) sits in your CTC every year but is paid only when you leave after 5+ continuous years of service. Leave before 5 years and you forfeit it. Never treat CTC gratuity as accessible cash when comparing offers — the formula is (15/26) × last-drawn monthly basic × years of service, exempt up to Rs 20 lakh u/s 10(10).
Rs 15 Lakh CTC — Full Salary Breakdown
Assuming basic = Rs 6L (40% of CTC), HRA = Rs 3L and special allowance = Rs 3L, with TDS estimated under the new regime (Rs 75,000 standard deduction, no other deductions).
| Item | Annual (Rs) | Monthly (Rs) | Note |
|---|---|---|---|
| CTC | 15,00,000 | 1,25,000 | Total employer cost |
| Less: employer PF (12% of 6L) | − 72,000 | − 6,000 | Employer contribution to EPFO |
| Less: gratuity (4.81% of 6L) | − 28,860 | − 2,405 | Provisioned; paid on exit after 5 yrs |
| Gross salary | 13,99,140 | 1,16,595 | Offer-letter / payslip header |
| Less: employee EPF (12% of 6L) | − 72,000 | − 6,000 | Your share, deducted from salary |
| Less: professional tax | − 2,400 | − 200 | State levy (max Rs 2,500/yr) |
| Less: income-tax TDS (est.) | − 60,000 | − 5,000 | Approx., new regime, no deductions |
| Net take-home | 11,64,740 | 97,062 | ≈ 77.6% of CTC |
Illustrative. Actual TDS varies with regime, investments and declared deductions. Under the old regime, HRA (u/s 10(13A)) and 80C could lower TDS if rent and investments are high.
Higher take-home when
- Basic is a smaller share of CTC (less PF locked in)
- You are on the new regime with few deductions
- Rebate u/s 87A applies (taxable income up to Rs 12L)
- Little or no professional-tax state
Lower take-home when
- Basic is a large share (more PF deducted)
- You are in the 30% bracket with high TDS
- Large employer PF + gratuity inflate CTC on paper
- Variable pay is counted in CTC but not yet earned
Want your exact take-home and the best regime worked out?
Get a Take-Home Estimate →How EPF & PF Are Taxed
Both you and your employer contribute 12% of basic + DA to EPF. The EPFO interest rate for FY 2024-25 is 8.25% (retained by the CBT). EPF is broadly tax-free (EEE), but recent limits make part of it taxable.
| Situation | Tax treatment | Section |
|---|---|---|
| Interest on your EPF contribution > Rs 2.5L/yr | Taxable | 10(11)/(12) |
| Same, where there is no employer contribution | Taxable only above Rs 5L/yr | 10(11)/(12) |
| Employer PF + NPS + superannuation > Rs 7.5L/yr | Taxable perquisite | 17(2)(vii) |
| EPF withdrawal before 5 yrs continuous service | Taxable · TDS u/s 192A (10%, 20% no PAN) | 192A |
| EPF withdrawal after 5 yrs / transfer of PF | Exempt | 10(12) |
| VPF (voluntary extra employee PF) | Same rate; interest subject to Rs 2.5L rule | 10(11)/(12) |
The employer's EPF share is not part of your Section 80C; only your own contribution (incl. VPF) counts, under the old regime.
Withdrawing EPF before 5 years of continuous service makes the whole withdrawal taxable, with TDS u/s 192A at 10% (20% without PAN). Transferring your PF to the new employer on a job change is not taxable and preserves the 5-year clock — always transfer rather than withdraw.
Perquisites, Bonus & Other Income
Beyond salary, perquisites (Rule 3) and non-salary income are taxed too. Bonus and variable pay are fully taxable as salary in the year received; here is how the rest is treated.
| Income / perk | Tax treatment | TDS |
|---|---|---|
| Rent-free / concessional accommodation | Perquisite valued under Rule 3 | u/s 192 |
| Company car / ESOP | ESOP taxed on exercise: FMV − exercise price (u/s 17(2)); startup TDS deferral | 192 |
| Bank / FD interest | Slab rate | 194A — over Rs 50k (Rs 1L senior) |
| Dividend income | Slab rate since FY 2020-21 | 194 — 10% over Rs 10,000 |
| Gift from non-relative > Rs 50k/yr | Taxable u/s 56(2)(x) | — |
| Savings-account interest | 80TTA Rs 10k / 80TTB Rs 50k (senior) — old regime | — |
194A / 194 thresholds reflect Budget 2025 (effective 1 Apr 2025). 80TTA/80TTB deductions apply only under the old regime.
Choosing the right regime is the single biggest lever on your take-home — compare with our income-tax calculator and check the income-tax slabs for your bracket.
Structuring a new offer or optimising your salary for lower TDS?
Talk to a Tax Expert →CTC, Salary & Take-Home — Frequently Asked Questions
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