CTC vs In-Hand Salary: What is the Difference and How to Calculate?
Understand the difference between Cost to Company (CTC) and your actual in-hand take-home salary. Includes a complete breakdown of all deductions — EPF, professional tax, TDS, and more.
Bhanu Pratap Singh DeoJune 26, 20268 min read
Key Takeaways
CTC includes employer EPF, gratuity, and insurance — money you never see in your bank account.
Typical in-hand salary is 65–80% of CTC, depending on structure and tax regime.
EPF is deducted at 12% of Basic Salary from both employee and employer.
Professional Tax varies by state — up to ₹2,400/year maximum.
The salary structure (Basic : HRA ratio) significantly affects your in-hand under the Old Tax Regime.
When you receive a job offer in India, the package is always quoted as CTC — Cost to Company. But when your salary hits your bank account, it is significantly less. The gap can be 20–35%. Understanding every component that bridges this gap helps you negotiate better, plan more accurately, and optimise your salary structure.
What is CTC?
CTC Component
Who Pays
Comes to You?
Basic Salary
Company (to you)
Yes
HRA
Company (to you)
Yes
Allowances
Company (to you)
Yes/Partially
Employee EPF (12% of basic)
Deducted from gross
No (goes to EPF)
Employer EPF (12% of basic)
Company (not to you)
No (goes to EPF)
Gratuity Provision (4.81% of basic)
Company (not to you)
Only after 5 yrs
Health Insurance Premium
Company (not to you)
As benefit only
All Salary Deductions Explained
Employee EPF (12% of Basic): Mandatory for employees with basic salary ≤ ₹15,000. Goes into your EPF account, accessible at retirement.
Professional Tax (₹150–₹200/month): State-level tax deducted by employer. Can be claimed as deduction in ITR.
TDS (Tax Deducted at Source): Income tax deducted monthly based on estimated annual tax liability.
Health Insurance Premium: If provided within CTC, the premium may be deducted from gross salary.
VPF (Voluntary Provident Fund): If you opt for extra EPF contribution beyond 12%, this is deducted.
CTC to In-Hand Salary Formula
Gross Salary = CTC − Employer EPF − Gratuity Provision − Other non-cash benefits
Net Salary = Gross Salary − Employee EPF − Professional Tax − TDS − Other deductions
Real-World Examples
CTC
Gross Monthly
Employee EPF
TDS/Month
In-Hand/Month
₹6,00,000
₹50,000
₹2,400
~₹0
₹47,400
₹10,00,000
₹83,333
₹4,000
~₹650
₹78,483
₹15,00,000
₹1,25,000
₹7,200
₹8,125
₹1,09,475
₹20,00,000
₹1,66,667
₹7,200*
₹19,000
₹1,40,267
₹30,00,000
₹2,50,000
₹7,200*
₹38,000
₹2,04,600
How to Increase Your In-Hand Salary
Restructure allowances: Maximize food coupons (₹26,400/year), telephone reimbursement (₹24,000/year), LTA, and books allowance — all tax-exempt.
Choose the right tax regime: At ₹10L, the New Regime saves more tax giving higher in-hand.
Negotiate employer NPS: Employer NPS contribution under 80CCD(2) is tax-free in both regimes.
Claim tax deductions: Timely submission of proof for 80C, 80D, and home loan reduces TDS.
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Bhanu Pratap Singh Deo
Co-founder of FinBuddy and B.Tech. student at Birla Institute of Technology, Mesra. Writes about income tax, salary structuring, and tax-saving strategy.
Frequently Asked Questions
For most Indian salaried employees, take-home salary is 65–80% of CTC. This varies based on income level, EPF structure, gratuity provision, and salary structure.
