CTC, gross and in-hand salary: what each term means

Three numbers, three different questions

The confusion is worth clearing up precisely, because the three words answer different questions and job offers use whichever one flatters them most. CTC answers "what does this hire cost the company?" Gross salary answers "what is contractually payable to this employee?" In-hand answers "what will land in the account on the last working day of the month?"

Each is smaller than the one before it, and the steps between them are not negotiable line items — they are statutory contributions and taxes. What you can negotiate is the CTC itself and, sometimes, how it is structured.

The three figures on a ₹15 lakh package

Take a CTC of ₹15,00,000 with basic at 40%, the employer's PF inside CTC as its only employer-paid component, and professional tax of ₹200 a month. Basic is ₹6,00,000, but PF runs on half the package — ₹7,50,000 — because under the Code on Social Security allowances beyond half of pay count as wages. So the employer's 12% PF share is ₹90,000, and gross salary is ₹14,10,000 — the first step down from CTC.

From gross, your own ₹90,000 of PF comes off, plus FY 2026-27 new-regime income tax of ₹83,460 (₹80,250 of slab tax on taxable income of ₹13,35,000, plus ₹3,210 of cess) and ₹2,400 of professional tax. In-hand is ₹12,34,140 a year, or ₹1,02,845 a month.

Written as a ladder: ₹15,00,000 CTC → ₹14,10,000 gross → ₹12,34,140 in-hand. The company spends ₹15 lakh, you are contractually owed ₹14.1 lakh, and ₹12.34 lakh reaches you — with ₹1,80,000 of the difference sitting in your own EPF account rather than gone.

Why "₹15 lakh salary" means two different tax bills

This is where the vocabulary actually costs money. A ₹15,00,000 gross salary attracts ₹97,500 of tax under the new regime. A ₹15,00,000 CTC, structured as above, has a gross of only ₹14,10,000 and attracts ₹83,460 — ₹14,040 less, for the same headline number.

So when a calculator, an article or a recruiter says "tax on a ₹15 lakh salary", the first question is which ₹15 lakh. If the figure came off an offer letter it is almost certainly CTC, and the tax will be lower than a gross-based table suggests.

What hides inside CTC

The components that sit in CTC but never appear in a monthly credit are consistent across most Indian employers: the employer's 12% PF contribution, gratuity accrual where the company provisions it, group health and life insurance premiums, and any employer NPS contribution. Some CTC letters also add notional values for meal cards, transport or a leased car.

Gratuity accrual is roughly 4.81% of wages — 15 days' pay for each year, on a 26-day month. Since the Code on Social Security came into force on 21 November 2025, those wages are basic plus DA topped up to at least half of all pay, the same base as PF. On the ₹15,00,000 package above that base is ₹7,50,000 a year rather than the ₹6,00,000 basic, so a gratuity line still worked on basic alone may understate what the Code would pay on leaving.

Then there is variable pay. A performance bonus counted at 100% in the CTC line is paid at whatever the actual rating produces, once or twice a year. It is the single largest reason an offer's headline and its monthly reality feel unrelated, and it is the number worth asking about explicitly before signing.