CTC to In-Hand Salary — How the Conversion Works

Your offer letter quotes a CTC (Cost to Company), but your bank account receives something smaller. Here’s exactly where the money goes.

The anatomy of CTC

CTC is everything your employer spends on you:

1. Basic salary — usually 40–50% of CTC. PF and gratuity are calculated on this.
2. Allowances — HRA, special allowance, etc.
3. Employer PF — 12% of basic (capped at a ₹15,000/month wage base).
4. Gratuity accrual — about 4.81% of basic per year, set aside for your gratuity.
5. Other benefits — insurance, incentives, reimbursements.

The deductions that shrink your pay

From gross salary, these are subtracted:

• Employee PF — your own 12% contribution.
• Professional tax — about ₹200/month in most states.
• Income tax — calculated on your taxable salary after the standard deduction and, in the old regime, your 80C/80D deductions.

Worked example

CTC ₹12,00,000, basic 40%, new regime:

• Basic = ₹4,80,000; monthly basic = ₹40,000
• Employer PF = 12% of ₹40,000 = ₹4,800/month → ₹57,600/yr (capped at ₹15,000/month basic, so here full basic qualifies… actually the cap means only the first ₹15,000 of monthly basic earns PF at 12%, i.e. ₹1,800/month — if your basic exceeds ₹15,000/month, PF is capped)
• Gross = CTC − employer PF − gratuity
• Employee PF, professional tax and income tax are subtracted for in-hand
• In-hand ≈ ₹96,200/month in the common case where the 87A rebate keeps tax at ₹0

Why your basic percentage matters

A higher basic means higher PF and gratuity savings, but it also raises your taxable salary. A lower basic (and higher allowance) gives more in-hand today but less retirement savings. Employers structure the split deliberately — negotiate it consciously.

Run your exact numbers with the Salary Calculator, which breaks down every deduction line by line.