How do I calculate in-hand salary from CTC?

Take your CTC, subtract the employer's PF contribution and any other employer-paid components to reach gross salary. From that gross, subtract your own PF contribution, income tax and professional tax. What is left is annual in-hand pay; divide by twelve for the monthly figure. On a ₹20,00,000 package that works out to about ₹1,36,097 a month.

The four subtractions, in order

CTC is what your employer spends on you, not what you receive, and the two differ by four deductions that come off in a fixed order. First, the employer's own PF contribution: it is inside your CTC but goes to your EPF account, never your bank account. Taking it off leaves gross salary — the figure the rest of the maths runs on.

From gross, three things come off. Your own PF contribution, which is 12% of basic salary. Income tax, deducted monthly as TDS. And professional tax, a state levy of around ₹200 a month where it applies at all. The order matters because income tax is charged on gross, not on CTC — the employer's PF share is never your taxable income in the first place.

Gratuity accrual, employer-paid insurance premiums and any notional perks sit inside CTC in the same way the employer PF share does: real cost to the company, absent from your monthly credit.

In-hand = CTC − employer PF − employee PF − income tax − professional tax

Worked on a ₹20 lakh package

Take a CTC of ₹20,00,000 with basic salary at 40% of CTC, the employer's PF inside CTC, and professional tax of ₹200 a month. Basic is ₹8,00,000, so each side contributes 12% of it — ₹96,000 a year. Removing the employer's ₹96,000 leaves a gross salary of ₹19,04,000.

Under FY 2025-26 new-regime rules, taxable income is ₹19,04,000 minus the ₹75,000 standard deduction, or ₹18,29,000. The slabs give ₹1,65,800 of tax and 4% cess adds ₹6,632, for ₹1,72,432 payable. Now subtract from gross: ₹19,04,000 − ₹96,000 own PF − ₹1,72,432 tax − ₹2,400 professional tax = ₹16,33,168 a year, or ₹1,36,097 a month.

That is 81.7% of the advertised CTC reaching your account. The gap is not a deduction you can appeal — roughly half of it is money genuinely saved on your behalf in EPF, and the rest is tax.

Why two people on the same CTC take home different amounts

The single biggest structural variable is what share of CTC is labelled basic salary, because PF is 12% of basic rather than of CTC. On a ₹12,00,000 package, basic at 30% produces about ₹92,600 a month in hand; at 40% it is ₹90,200; at 50% it is ₹87,800. Same CTC, a ₹4,800 monthly spread, and the difference is not lost — it is sitting in EPF and raising the gratuity you would be paid on leaving.

The second variable is variable pay. A CTC letter usually counts the full performance bonus, but that money arrives once or twice a year, if targets are met, so the monthly credit is calculated on the fixed portion alone. Comparing two offers on headline CTC without checking the fixed-versus-variable split compares two different things.

What a quick estimate leaves out

The calculation above models tax under the new regime, PF at 12% of full basic for both sides, and professional tax as you enter it. It does not model the ₹15,000 statutory PF wage ceiling that some employers apply, ESI, employer NPS under Section 80CCD(2), gratuity accrual, or non-cash perks — all of which shift the figure.

It also assumes the new regime. If you have substantial rent, a home loan or a filled 80C, run both regimes on your own numbers first, because the tax line in this calculation is the one that changes.

See all of this on your own numbers

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