How CTC, gross and in-hand salary differ in India
When you get an offer letter, the big number on top is your CTC — cost to company. It is not what lands in your bank account. CTC bundles in money your employer spendson your behalf but that you never see month to month: the employer's 12% provident-fund contribution, the gratuity the company sets aside, and sometimes insurance or meal benefits. Your in-hand (take-home) salary is what is left after the legally required deductions come out of your gross pay.
The three layers
1. CTC → Gross. Remove the employer-side costs. Employer PF is 12% of your basic salary (capped at ₹1,800/month if your company applies the ₹15,000 wage ceiling). Gratuity is set aside at the conventional 4.81% of basic. What remains is your gross salary — the figure printed on your monthly payslip.
2. Gross → Taxable. Subtract the standard deduction (₹75,000 in the new regime, ₹50,000 in the old) and, in the old regime, your exemptions and deductions — HRA, 80C investments, 80D health insurance, home-loan interest and so on. Your own 12% PF contribution counts under section 80C in the old regime.
3. Taxable → In-hand. Apply the income-tax slabs, add 4% health-and-education cess, and deduct that plus your PF contribution and state professional tax from gross. Divide by twelve and you have your monthly take-home.
New vs old regime, FY 2025-26
The new regime is now the default. Its slabs are wider and its rates lower, the standard deduction is higher at ₹75,000, and — the big change this year — income up to ₹12,00,000 is effectively tax-free thanks to the enhanced section 87A rebate. With the standard deduction, a salaried person can earn a gross of roughly ₹12.75 lakh and still owe no income tax. The old regime only wins when your itemised deductions (HRA in a metro, a full ₹1.5 lakh of 80C, health insurance, a home loan) are large enough to push your taxable income well below the new-regime number. The calculator above runs both and tells you which leaves more in your pocket.
Frequently asked questions
What is the difference between CTC and in-hand salary?
CTC (cost to company) is the total annual amount your employer spends on you, including employer PF, gratuity and benefits that never reach your bank account. In-hand (take-home) salary is what you actually receive after employee PF, professional tax and income tax are deducted from your gross.
How is in-hand salary calculated from CTC in India?
Start with CTC, remove employer PF (12% of basic) and the gratuity provision (4.81% of basic) to get gross salary. From gross, subtract your own PF contribution (12% of basic), professional tax (a state levy up to ₹2,400/year) and income tax including 4% cess. The result divided by 12 is your monthly in-hand.
Should I pick the new or old tax regime?
It depends on your deductions. The new regime (FY 2025-26) has lower rates and a ₹75,000 standard deduction, and income up to ₹12,00,000 is effectively tax-free via the section 87A rebate. The old regime is usually better only if your HRA, 80C, 80D and home-loan deductions are large. This calculator computes both and highlights the one that leaves you more in hand.
Is income up to ₹12 lakh really tax-free in FY 2025-26?
Under the new regime, a resident individual with taxable income up to ₹12,00,000 pays zero tax because of the enhanced section 87A rebate. With the ₹75,000 standard deduction, a salaried person can have a gross salary up to about ₹12.75 lakh and still pay no income tax.
This is an estimate for a resident individual below 60, salaried, for FY 2025-26 (AY 2026-27). It does not model every allowance, surcharge marginal relief, or employer-specific structure. It is a calculator, not tax advice — confirm with a chartered accountant before filing.