CTC (Cost to Company) is the total annual amount a company spends on an employee, including basic salary, allowances, employer EPF, gratuity provision, and any other benefits. It is always higher than what the employee actually receives.

What is the difference between gross salary and net salary?

Gross salary is your total salary before deductions. Net salary (or in-hand salary) is what you receive after deducting employee EPF, professional tax, and income tax (TDS).

In-hand salary explained: CTC vs gross vs take-home pay

Q: What is gross salary?

Gross salary is CTC minus the employer's EPF contribution. It is the salary the company directly pays to the employee before income tax and employee PF are deducted.

Updated June 2026 · FY 2026-27 (AY 2027-28)

You accepted a job offer with a CTC of ₹15 lakhs. Your friend with the same CTC gets a different monthly credit than you. Your colleague's payslip shows a "gross salary" that's lower than his CTC. What is going on?

This guide breaks down every number on your payslip — CTC, gross salary, net salary, and in-hand pay — so you know exactly where each rupee goes.

What is CTC?

CTC stands for Cost to Company. It is the total amount your employer spends on you in a year — every rupee, including what never reaches your bank account. A typical CTC includes:

Basic salary
House Rent Allowance (HRA)
Special allowance / performance pay
Employer's EPF contribution (12% of basic)
Gratuity provision (~4.81% of basic)
Medical / food / transport allowances
Any company-provided insurance or other benefits

The employer EPF contribution and gratuity provision are the two components that inflate CTC the most — they go into your PF account and a future payout, not your monthly salary. This is why your in-hand pay always looks lower than your CTC suggests.

CTC → Gross salary

Remove the employer's EPF contribution (12% of basic pay) from your CTC and you get your gross salary — the salary your company actually processes as pay, before your own deductions. If your company also includes gratuity inside CTC, that is removed too.

Example: CTC ₹12,00,000 — Employer EPF ₹57,600 (12% of ₹4,80,000 basic) = Gross salary ₹11,42,400

What gets deducted from gross salary?

Three deductions come out of your gross salary before you receive it each month:

1. Employee EPF (12% of basic)

You contribute 12% of your basic pay to your EPF account every month. This is deducted from your gross salary before payment. On a ₹40,000 basic, that's ₹4,800/month going to EPF. Over a career it builds a meaningful retirement corpus — but it reduces monthly cash in hand.

2. Professional tax

Several states levy a small tax on salaried employees: Tamil Nadu, Maharashtra, and Karnataka charge ₹2,400 per year (₹200/month). Delhi, Haryana, and several other states levy no professional tax at all.

3. Income tax (TDS)

Your employer estimates your annual tax for the year, divides it by 12, and deducts it as TDS every month. This is the largest variable deduction and depends on your income level, your chosen tax regime, and any deductions you declare to your employer. For FY 2026-27, income up to ₹12,75,000 attracts zero tax under the new regime.

The full breakdown with numbers

Component	Example (₹12L CTC, 40% basic, TN state)
Annual CTC	₹12,00,000
Less: Employer EPF	−₹57,600
Gross salary	₹11,42,400
Less: Employee EPF	−₹57,600
Less: Professional tax (TN)	−₹2,400
Less: Income tax + cess (new regime)	−₹0 (below ₹12.75L threshold)
Annual take-home	₹10,82,400
Monthly take-home	₹90,200

Use our in-hand salary calculator to compute this for your exact CTC, basic percentage, state, and deductions.

New regime vs old regime — which affects your take-home more?

At ₹12L CTC, both regimes may give similar or even identical tax (zero, in many cases). But as CTC rises above ₹15L, the tax regime choice increasingly matters. The new regime has lower slab rates and a ₹75,000 standard deduction but no deductions. The old regime has higher rates but allows 80C (up to ₹1.5L), HRA exemption, and home-loan interest.

As a rough guide: if your total deductions are below ₹2.5 lakh, the new regime is usually better. Above ₹4 lakh in deductions, the old regime often wins. Our salary calculator shows both side by side for your numbers.

Frequently asked questions

What is CTC?

CTC (Cost to Company) is the total annual amount a company spends on an employee, including basic salary, allowances, employer EPF (12% of basic), gratuity provision, and any other company-paid benefits. It is always higher than what the employee actually receives in hand.

What is gross salary?

Gross salary is CTC minus the employer's EPF contribution (and gratuity if included in CTC). It is the salary figure your employer processes as pay. Employee deductions (EPF, tax, professional tax) are then taken from gross salary to give you your net or in-hand salary.

Why is my take-home much less than my CTC?

Three reasons: (1) Employer EPF (12% of basic) and gratuity provision sit inside CTC but don't come to you monthly. (2) Employee EPF (another 12% of basic) is deducted from your salary. (3) Income tax and professional tax are deducted monthly. Together these can reduce a ₹12L CTC to a ₹9–10L annual take-home.

Is bonus included in CTC?

It depends on the company. Some companies include performance bonus or variable pay in CTC as an "at-risk" component, usually 10–20% of CTC. Others pay it separately and it is not part of the fixed CTC. Always clarify whether the CTC quoted is with or without variable pay.

Disclaimer: Examples are illustrative and based on standard assumptions. Actual take-home will vary by company salary structure, applicable deductions, and individual tax situation. This is for informational purposes only and not tax advice.