An offer letter shows a CTC of Rs 12 LPA, but the in-hand salary is several thousand rupees less every month. The gap is not a mistake - CTC (Cost to Company) counts everything the employer spends on you, while take-home pay subtracts your own contributions and taxes along the way.
What exactly is CTC?
CTC is the total annual cost your employer incurs: basic salary + allowances + employer PF + gratuity + insurance + any bonus and benefits. Components you never see in cash - like employer provident fund and the group health policy - are included in the number.
From CTC to in-hand: what gets subtracted
- Employee PF contribution - typically 12% of the basic, deducted from your salary each month.
- Income tax (TDS) - deducted as per your slab, reduced by the standard deduction and any investments you declare.
- Professional tax - a small state levy (in states that charge it, usually Rs 200-250 a month).
- Non-cash components - the insurance premium your employer pays for you, and provisions for gratuity, are in CTC but never reach your bank.
A simple way to think about it
Take CTC, remove the non-cash parts (employer PF, gratuity, insurance premium) to get your gross salary. Then remove the cash deductions (your PF share, TDS, professional tax) to get net / in-hand salary. Each drop shrinks the headline number by roughly 10-15%.
Rough rule of thumb
For most salaried jobs, in-hand salary lands around 75-85% of CTC. A Rs 12 lakh CTC typically pays about Rs 80,000-86,000 a month after PF and new-regime tax, depending on the basic-vs-allowance split and your deductions. The split matters: a higher basic means higher PF and slightly higher tax, but also better gratuity and loan eligibility.
Two salaries to compare fairly
When deciding between offers, never compare CTC alone - compare in-hand per month, variable bonus likelihood, and the non-cash value. The weaker offer may hand you more cash each month if it carries a lower employer PF or a larger allowance share.
Run your own numbers with the free Salary Calculator - enter your CTC and structure to see the monthly in-hand estimate. Then check what income tax removes with the Income Tax Calculator for FY 2026-27, and see what a fixed deposit could do with the surplus using the FD Calculator.