# CTC vs In-Hand Salary: Why Your Pay Is Lower (2026) > Why in-hand salary is lower than CTC: PF, gratuity, variable pay, professional tax and TDS, with worked examples for INR 12 lakh and INR 20 lakh offers. Source: https://trykosh.com/learn/ctc-vs-in-hand-salary Guide - Salary # CTC vs in-hand salary: where the money goes A INR 12 lakh offer doesn't mean INR 1 lakh a month in your account. CTC is what you cost your employer, not what you're paid. Here is every gap between the two, with real numbers, and what to ask before you sign. Updated 25 October 20266 min readBy the Kosh team On this page[Three different numbers](#three-numbers)[What sits between CTC and in-hand](#components)[Worked example: a INR 12 lakh offer](#example-12-lakh)[Worked example: a INR 20 lakh offer](#example-20-lakh)[How structure changes take-home](#structure)[What to ask before you accept an offer](#questions)[Worked example: two offers](#two-offers)[FAQs](#faq) ## Three different numbers Offer letters and payslips use three terms that sound alike. - **CTC (cost to company):** everything your employer spends on you in a year, including money that never reaches your account, such as the employer's PF contribution and gratuity provision, and pay that's conditional, such as a performance bonus. - **Gross salary:** CTC minus the employer's own contributions (PF, gratuity, sometimes insurance). It's the total of the earnings on your payslip: basic, HRA, allowances and the bonus when paid. - **In-hand (net) salary:** gross salary minus your own PF, professional tax and income tax (TDS). This is what lands in your bank account. ## What sits between CTC and in-hand Typical deductions between CTC and take-home Item How it's usually worked out Comes back to you? Employer PF 12% of basic (or of INR 15,000 if your employer caps it) Yes, in your EPF account, at 8.25% (FY 2025-26 rate) Gratuity provision 4.81% of basic Only after 5 years of service, or when the law says otherwise Variable or performance pay A share of CTC, paid yearly or quarterly If targets are met; often less than 100% Your PF 12% of basic Yes, in your EPF account Professional tax Up to INR 2,500 a year, depending on the state No Income tax (TDS) Your yearly tax spread over the months Refunded only if over-deducted Group insurance, meal cards, others Varies by employer As benefits, not cash Of the employer's 12% PF, 8.33% of wages up to INR 15,000 (INR 1,250 a month) goes to the pension scheme (EPS) and the rest to your EPF balance. The 4.81% gratuity figure is 15 days' basic for each year of service, spread across 12 months. You get gratuity only when you leave after qualifying, so on a two-year job it's CTC you'll likely never see. ## Worked example: a INR 12 lakh offer Here's a common structure: 10% variable pay, basic at 50% of fixed pay, employer PF on full basic, gratuity inside CTC, INR 2,500 of professional tax and the new regime. The [in-hand salary calculator](/tools/in-hand-salary-calculator) gives: INR 12 lakh CTC to take-home, new regime, FY 2026-27 Step Amount a year CTC INR 12,00,000 Less employer PF INR 64,800 Less gratuity provision INR 25,974 Gross salary INR 11,09,226 Less your PF INR 64,800 Less professional tax INR 2,500 Less income tax INR 0 Take-home for the year INR 10,41,926 That averages **INR 86,827 a month**, but the variable pay arrives as a lump sum, so a normal month is about **INR 76,827**. Income tax is nil because the gross salary of INR 11.09 lakh is within the new regime's INR 12.75 lakh tax-free line. If the same person chose the old regime with only EPF under 80C, tax would be INR 1,15,321 and the monthly average would fall to INR 77,217. That's why first jobbers almost always belong in the new regime: see [old vs new regime](/learn/old-vs-new-tax-regime-fy-2026-27). ## Worked example: a INR 20 lakh offer Same structure at INR 20 lakh CTC: basic is INR 75,000 a month, employer PF INR 1,08,000 a year, gratuity INR 43,290, gross INR 18,48,710. After your PF, professional tax and INR 1,60,932 of income tax, take-home is INR 15,77,278: **INR 1,31,440 a month** on average and about **INR 1,16,224** in a month without the bonus. Roughly 79% of the CTC reaches your bank account, against 87% at INR 12 lakh, because income tax starts to bite. [Free tool**In-hand salary calculator**Turn a CTC offer into what actually lands in your bank account each month, after PF, gratuity, professional tax and income tax.](/tools/in-hand-salary-calculator)[Free tool**Salary breakup calculator**See how a typical Indian employer would split your CTC into basic, HRA, special allowance, PF and gratuity, month by month.](/tools/salary-breakup-calculator)[Free tool**Salary hike calculator**A 15% hike rarely means 15% more in your account. See the raise after tax, per month.](/tools/salary-hike-calculator)[Free tool**EPF calculator**Project your Employees' Provident Fund balance at retirement, with yearly raises, the employer's split between EPF and EPS, and any voluntary PF you add.](/tools/epf-calculator)[Free tool**Gratuity calculator**Gratuity is a lump sum your employer pays when you leave after long service. Enter your last basic + DA and years of service to see the amount, how the new Labour Codes change it, and how much is tax-free.](/tools/gratuity-calculator) ## How structure changes take-home - **Higher basic, lower take-home.** PF and gratuity are percentages of basic. The Labour Codes require basic plus DA to be at least half of total pay, which raised PF and gratuity for many employees and trimmed their monthly cash. The extra goes into PF, so it isn't lost, just locked up. - **PF on the INR 15,000 ceiling.** Some employers calculate PF on INR 15,000 instead of full basic. Your take-home rises, your retirement savings fall. Ask which your employer does. - **HRA versus special allowance.** Both are fully taxable in the new regime, so the split doesn't matter there. In the old regime, HRA can be partly tax-free if you pay rent. See the [HRA guide](/learn/how-to-claim-hra-exemption). - **Employer NPS.** Moving part of CTC into NPS lowers take-home but also lowers tax, by up to 14% of basic in the new regime. - **Joining bonus and retention bonus.** Often included in first-year CTC, often with a clawback if you leave within a year. Ask whether the CTC repeats in year two. - **ESOPs and RSUs.** Sometimes quoted inside CTC. They're taxed as salary when they vest or are exercised, and their value isn't guaranteed. Use the [ESOP tax calculator](/tools/esop-tax-calculator). ## What to ask before you accept an offer 1. What is the **fixed** part of the CTC, and how much of the variable pay was actually paid out to people in this role last year? 2. Is **employer PF** calculated on full basic or on INR 15,000? 3. Is **gratuity** or **insurance** included in the CTC figure? 4. Is any **joining bonus** or **ESOP** value counted in the CTC, and is it repeated? 5. Does the company offer **employer NPS** or other restructuring? Compare offers on monthly fixed take-home first, then on the rest. If you're comparing a raise, the [salary hike calculator](/tools/salary-hike-calculator) shows how much of it survives tax. ## Worked example: two offers Tanvi has two offers. Offer A is INR 14 lakh CTC with 20% variable pay. Offer B is INR 13 lakh with 5% variable. Both use basic at 50% of fixed pay, PF on full basic, gratuity in CTC and the new regime. Two offers compared with the in-hand salary calculator Offer A: INR 14 lakh, 20% variable Offer B: INR 13 lakh, 5% variable Gross salary INR 13,05,864 INR 11,96,198 Income tax INR 32,099 INR 0 Take-home for the year, full bonus INR 12,04,065 INR 11,19,598 Normal month, without the bonus INR 77,579 INR 87,883 Offer A looks INR 1 lakh bigger, and with its full bonus it does pay about INR 84,000 more over the year. But in every normal month, Offer B puts **INR 10,304 more** in Tanvi's account, because less of it is variable and its gross stays under the INR 12.75 lakh tax-free line. If A's bonus pays out at, say, half, most of the gap disappears. The right answer depends on how reliable that bonus is, and on whether her monthly budget runs on the fixed part. Build the budget on the fixed number; see [how to build a monthly budget](/learn/how-to-build-a-monthly-budget). ## Frequently asked questions What is the difference between CTC and in-hand salary? CTC is the total your employer spends on you, including its own PF contribution, gratuity provision and variable pay. In-hand salary is what reaches your bank account after your PF, professional tax and income tax are deducted. The gap is usually 10% to 25% of CTC. What is the in-hand salary for INR 12 lakh CTC? With a typical structure in the new regime, 10% variable pay and PF on full basic, it averages about INR 86,800 a month over the year, or about INR 76,800 in a normal month without the bonus. Income tax is nil because the gross salary is under INR 12.75 lakh. Is gratuity part of CTC? Many employers include a gratuity provision of about 4.81% of basic in CTC. You receive gratuity only when you leave after qualifying service, normally five years, so on a short stint it is CTC you may never get. Why is my in-hand salary lower after the Labour Codes? The Labour Codes require basic plus DA to be at least half of total pay. Since PF and gratuity are percentages of basic, a higher basic raises those deductions and lowers monthly cash, while increasing your retirement savings. Does professional tax apply in every state? No. It is levied by some states and not others, at up to INR 2,500 a year. It is deductible from salary in the old regime but not in the new regime. ## Sources - [EPFO](https://www.epfindia.gov.in/) - [Ministry of Labour and Employment](https://labour.gov.in/) Written by the Kosh team and checked against the rules in force on 25 October 2026. This guide is general information, not tax, legal or investment advice. Kosh is an educational financial planning tool by Primedepth Labs. It is not a SEBI-registered investment adviser and does not offer personalised investment advice, hold your money or execute trades. Markets carry risk; read scheme documents carefully and consult a registered adviser before acting. ## Upload your statement and Kosh does this for you. Kosh reads your bank and card statements, works out your tax under both regimes and turns guides like this one into your own numbers and next steps. [Start free](/signup?via=learn-ctc-vs-in-hand-salary)