Your whole CTC is not taxed. Salary is taxed after a standard deduction of Rs 75,000 (new regime) or Rs 50,000 (old regime). Under the old regime you can also exempt HRA u/s 10(13A) and LTA u/s 10(5); the new (default) regime drops almost all of these but has a higher standard deduction and Rs 12 lakh rebate. Perquisites, gratuity, leave encashment, EPF interest, plus FD interest, dividend and gifts each have their own rules — covered below.
CTC includes the employer's PF (12% of basic), gratuity provision (4.81%) and ESI — money never credited to your account. Gross salary is CTC minus those employer contributions; take-home is gross minus employee PF, TDS and professional tax. Always ask for a gross and net breakdown before accepting an offer.
CTC to Take-Home — Rs 12L CTC, New Regime
A quick walk-through of how a Rs 12 lakh CTC becomes annual take-home under the default new regime for FY 2025-26. Use our income-tax calculator for your exact figures.
From CTC to gross salary
From gross to take-home
That is roughly Rs 84,446 a month in hand. Structure basic and HRA well and — on the old regime — HRA and LTA exemptions can cut the taxable figure further.
Salary Components — Exempt vs Taxable
Which parts of your pay slip are taxable, which are exempt, and the section that governs each. Most exemptions apply only under the old regime.
| Component | Status | Rule / condition |
|---|---|---|
| Basic salary | Taxable | Fully taxable; drives HRA, PF & gratuity |
| HRA (House Rent Allowance) | Part exempt | u/s 10(13A) — least of actual HRA, 50%/40% of basic+DA, rent minus 10% of salary. Old regime only |
| LTA (Leave Travel Allowance) | Part exempt | u/s 10(5) — domestic travel, 2 journeys in a 4-year block, bills needed. Old regime only |
| Standard deduction | Deduction | Rs 75,000 (new) / Rs 50,000 (old) — no proof needed |
| Special allowance | Taxable | Fully taxable in both regimes |
| Food coupons / meal vouchers | Exempt* | Up to Rs 50/meal; a perquisite benefit — old regime only |
| Employer NPS 80CCD(2) | Deduction | Up to 14% of basic+DA; allowed in the new regime too |
| Employee PF (12% basic) | 80C | Counts in the Rs 1.5L 80C cap — old regime |
| Professional tax | Deduction | Up to Rs 2,400/year — old regime |
* Perquisite exemptions and FBP allowances largely lapse under the new (default) regime, which trades them for a higher standard deduction and lower slabs.
Old vs New Regime for Salaried Employees
Old regime — exemptions live
- Standard deduction Rs 50,000
- HRA u/s 10(13A) & LTA u/s 10(5) allowed
- 80C, 80D, 80CCD(1B), 24(b) home-loan interest
- Best when rent + deductions are high
New regime (default) — fewer add-backs
- Standard deduction Rs 75,000
- Employer NPS 80CCD(2) still allowed
- Rebate u/s 87A up to Rs 12L taxable income
- Most allowances & 80C not available
- Simpler — best with few deductions
For most employees with CTC under about Rs 15 lakh and modest rent/deductions, the new regime's Rs 75,000 standard deduction, lower slabs and Rs 12 lakh rebate now win. If you pay high rent (large HRA) and use 80C/80D/home-loan interest fully, the old regime can still beat it. Run both — see our old vs new regime guide.
Not sure which regime saves you more on your salary?
Compare with an expert →Perquisites — Taxing Non-Cash Benefits
Perquisites are benefits in kind, valued under Rule 3 (revised 2023) and added to taxable salary. The common ones:
- Rent-free / concessional accommodation — valued as a percentage of salary (city-population slabs, revised 2023); reduced by any rent you pay.
- Company car — a fixed monthly perquisite value depending on engine capacity and whether a driver and running costs are provided.
- ESOPs — taxed as a perquisite at exercise on FMV minus exercise price; eligible startups get deferral of the TDS.
- Interest-free / concessional loans, club fees, gift vouchers over Rs 5,000 — each valued under Rule 3.
Retirement Benefits — Gratuity, Leave Encashment & Pension
| Benefit | Exempt up to | Section |
|---|---|---|
| Gratuity (non-govt) | Rs 20,00,000 | 10(10) |
| Leave encashment on retirement (non-govt) | Rs 25,00,000 | 10(10AA) |
| Retrenchment compensation | Rs 5,00,000 | 10(10B) |
| Commuted pension | Formula | 10(10A) |
| Family pension standard deduction | 1/3, max Rs 25,000 | 57(iia) |
Leave-encashment limit was raised to Rs 25 lakh in 2023 (from Rs 3 lakh). Government employees get full exemption on gratuity and leave encashment.
The standard deduction on family pension is one-third of the pension, capped at Rs 25,000 (raised from Rs 15,000) and available in the new regime too. Uncommuted pension is fully taxable as salary; commuted (lump-sum) pension is exempt under 10(10A) within the prescribed formula.
EPF & PF — Contributions, Interest & Withdrawal
Both you and your employer contribute 12% of basic + DA to EPF, which earned 8.25% for FY 2025-26. The recent tax traps are on high contributions and early withdrawal.
| Situation | Tax treatment | Section |
|---|---|---|
| Employee PF contribution | Qualifies for 80C (old regime) | 80C |
| Interest on employee PF above Rs 2.5L/year | Taxable (Rs 5L if no employer contribution) | 10(11)/(12) |
| Employer contribution to EPF+NPS+superannuation above Rs 7.5L/year | Taxable perquisite | 17(2)(vii) |
| EPF withdrawal after 5 years continuous service | Exempt | 10(12) |
| EPF withdrawal before 5 years | Taxable · TDS 10% (20% without PAN) | 192A |
| Transfer of PF on job change | Not taxable | — |
VPF (Voluntary Provident Fund) is extra employee contribution earning the same 8.25% and sharing the Rs 2.5 lakh taxable-interest threshold.
Withdrawing EPF before 5 years of continuous service makes the whole accumulation taxable and attracts TDS u/s 192A at 10% (20% if PAN is not furnished). Job changes do not reset the clock if you transfer the balance instead of withdrawing. See EPF withdrawal tax.
High salary crossing the Rs 2.5L / Rs 7.5L PF thresholds?
Get your PF taxed right →Other Income — Interest, Dividend, Gifts & Bonus
Income that is not salary still gets taxed — usually at your slab rate, with TDS at source. The main ones for a salaried taxpayer:
| Income | Taxed at | TDS / threshold |
|---|---|---|
| Bank / FD interest | Slab rate | 194A — TDS 10% above Rs 50,000 (Rs 1,00,000 senior citizen) |
| Savings-account interest | Slab rate | 80TTA Rs 10,000 deduction / 80TTB Rs 50,000 senior — old regime |
| Dividend | Slab rate | 194 — TDS 10% above Rs 10,000 (taxable since FY 2020-21) |
| Gifts from non-relatives | Slab rate | 56(2)(x) — taxable if aggregate over Rs 50,000/year |
| Bonus / joining bonus | Slab rate | Fully taxable as salary in the year received |
Budget 2025 raised the bank-interest TDS threshold to Rs 50,000 (Rs 1,00,000 for senior citizens), effective 1 April 2025.
If your FD interest is below Rs 50,000 the bank simply does not deduct TDS — but the interest is still taxable and you must declare it. Similarly, gifts from close relatives (parents, spouse, siblings) are always exempt, but gifts from friends aggregating over Rs 50,000 a year are fully taxable.
- Form 16 from employer
- Form 26AS & AIS cross-check
- Rent receipts & landlord PAN (HRA)
- LTA travel bills
- Interest certificates (bank / FD)
- Dividend & capital-gains statements
- EPF passbook / statement
- Old vs new regime compared before filing
Want us to combine salary, interest, dividend and file accurately?
Get ITR Filing Help →Salary & Other Income Tax — Frequently Asked Questions
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Salary, Perquisites & Other Income — Filed Right
Our CA-led team compares old vs new regime, claims HRA, LTA, 80C and every deduction, handles EPF, gratuity and other income, and files your ITR accurately — 100% online, across India.