Understanding Your Salary: CTC vs. In-Hand Pay
For many employees in India, there is often a confusing gap between the salary figure mentioned in the offer letter (CTC) and the actual amount credited to the bank account (In-Hand Salary). This calculator helps you demystify your payslip.
What is CTC (Cost to Company)?
CTC is the total expense a company spends on an employee. It includes:
- Gross Salary: Basic + HRA + Allowances.
- Retirals (Employer's Share): Employer's contribution to PF (12%) and Gratuity (4.81%). These are not paid monthly.
- Non-Monetary Perks: Health insurance premiums, food coupons, cab services, etc.
Key Deductions Explained
Your "Take Home" or Net Salary is calculated after several mandatory deductions:
- Provident Fund (PF): 12% of your Basic Salary + DA is deducted as your share of the contribution. (Note: The Employer's 12% is also part of CTC but is never deducted from your slip; it is simply not paid to you).
- Professional Tax (PT): A state-level tax levied on salaried professions. It usually varies from ₹200 to ₹2,500 per year depending on the state (e.g., Maharashtra, Karnataka).
- TDS (Income Tax): Tax Deducted at Source. Based on your taxable income slab (Old or New Regime), the employer deducts tax every month.
How to Maximize In-Hand Salary?
While mandatory deductions like PF cannot be avoided completely, you can optimize tax (TDS) by restructuring your CTC:
- Opt for HRA if you live in a rented house.
- Claim Standard Deduction (₹50,000).
- Use 80C deductions (PPF, ELSS, Insurance) to lower taxable income if choosing the Old Regime.
- Opt for food coupons or LTA if your company policy allows.
About This Calculator
This calculator provides an estimate based on standard compliance rules (PF @ 12%, PT @ ₹200). Actual salary may vary based on company-specific policies (e.g., some companies deduct PF on a capped wage of ₹15,000, while others deduct on full Basic).
Salary FAQs
- Is HRA exemption fully tax-free?
- No, HRA exemption is the minimum of: Actual HRA received, 50% of Basic Salary (Metro) or 40% (Non-Metro), or Rent Paid minus 10% of Basic.
- Can I opt out of PF?
- If your Basic Salary is above ₹15,000/month at the time of joining your first job, you are technically an "Excluded Employee" and can opt out, provided your employer agrees. However, most companies mandate it.