CTC vs In-Hand Salary vs Gross Salary – Complete Breakdown With Examples

• The new tax regime is the default regime, but eligible employees may choose the old tax regime.
• The new tax regime allows a ₹75,000 standard deduction for salaried taxpayers in FY 2025–26; the increase from ₹50,000 was introduced in Budget 2024 and continues for the year.
• Budget 2025 revised the FY 2025–26 slabs and raised the rebate threshold to a total income of ₹12,00,000, subject to the statutory conditions.
• Your monthly bank credit depends on fixed pay, employee PF, state professional tax, TDS and the timing of any variable pay; the CTC headline alone does not reveal it.

Have you ever noticed that the CTC that was offered to you during the hiring process and the amount you are getting in hand have a considerable difference? Before joining any organisation, newcomers generally have a misconception that the CTC offered and the in-hand salary are the same. But in reality, this is not true. There is a difference between the CTC and the take-home salary you receive at the end of every month. The various deductions from the gross salary result in a considerable difference between the initially offered CTC and the actual in-hand salary. The CTC to take-home salary can be calculated using the take-home salary calculator. Hence, it is important to understand your salary structure and the various terminologies used.

The gap is not caused only by deductions. It can also arise because the offer-letter CTC includes employer contributions, insurance and deferred or conditional benefits that never enter the monthly bank transfer.

Read the three figures in this order: A CTC tells you the employer’s total stated cost; a gross salary shows earnings before employee-side deductions, and net or in-hand pay is the amount left for payment. Employers do not all label these fields identically, so the detailed breakdown matters more than the heading alone.

CTC, or cost to the company, is the total amount spent by the employer to hire a new employee. It comprises several components, such as HRA, medical insurance, a provident fund, etc., which the employer adds to the basic pay. The allowances may include meal coupons, cab service, subsidised loans, etc. All these elements combined form the total cost to the company. Basically, CTC is the cost spent by the employer in hiring and sustaining the employee in the organisation.

Employer and employee EPF contributions are generally calculated at 12% of basic wages plus dearness allowance under the standard EPF rate, while the statutory wage ceiling relevant to mandatory coverage is ₹15,000 per month; contribution on higher wages depends on the applicable EPF arrangement.

Gross salary is the amount after the EPF and gratuity are subtracted from the CTC. Basically, the remuneration is paid before deducting the income tax, professional tax, and other deductions. It is inclusive of bonuses, overtime pay, paid holiday amount, and other differentials.

The take-home salary, or in-hand salary, is the amount the employee receives after tax and other deductions. The difference between gross and net salary is that the gross salary includes the income tax, professional tax, and other company policy deductions subtracted from the gross salary. In-hand salary is calculated as gross salary minus income tax and professional tax.

It is important to know that the CTC offered will differ from your actual in-hand salary at the end of the month. The difference between CTC and in-hand salary lies in the various deductions made at the time of payout. The take-home salary can be increased by proper tax planning and avoiding any income tax deductions.

For instance, if the employee invests INR 1.5 lakh in tax-saving entities under Section 80C (now called Section 123 under the Income Tax Act of 2025), such as mutual funds, PPF, etc., he/she can save on income tax. Such actions will result in reducing the total deductions from the gross salary, thereby increasing the in-hand salary. Also Read: How to budget your salary for maximum savings

The Section 80C (now Section 123) point above applies when the deduction is available under the old tax regime. The deductions are generally not available under the default new tax regime.

Consider an illustrative private-sector offer with an annual CTC of ₹12,00,000.

The fixed gross cash salary is ₹9,76,277, or about ₹81,356 per month, before employee deductions. Including the target bonus, the annual cash gross is ₹10,76,277.

Under the new regime, the taxable salary in this example is about ₹10,01,277 after the ₹75,000 standard deduction. Because the employee is assumed to be resident, has no other income and has no special-rate income, the regular slab tax is fully offset by rebate available up to a total income of ₹12,00,000.

Assuming employee EPF of ₹4,800 a month and West Bengal professional tax of ₹200 a month at this salary level, the regular monthly in-hand is about ₹76,356, with the ₹1,00,000 target bonus paid separately if earned.

A different result may arise if the employee has other taxable income, special-rate income, perquisites, arrears or a different payroll structure.

Also Read: Salary Structure in India

A high-variable CTC can therefore produce a lower regular bank credit than the same CTC built almost entirely from fixed cash.

TDS on salary is deducted using the employer’s estimate of the employee’s annual tax liability, normally spread across salary payments.

For FY 2025–26, the new regime slabs are

• nil up to ₹4,00,000;
• 5% from ₹4,00,001 to ₹8,00,000;
• 10% from ₹8,00,001 to ₹12,00,000;
• 15% from ₹12,00,001 to ₹16,00,000;
• 20% from ₹16,00,001 to ₹20,00,000; 25% from ₹20,00,001 to ₹24,00,000; and 30% above ₹24,00,000.

The new regime is the default, carries a ₹75,000 standard deduction for salary, and allows a resident individual a rebate up to ₹60,000 when total income does not exceed ₹12,00,000, subject to exclusions such as income taxed at special rates.

Under the old regime, the standard deduction is ₹50,000, and eligible claims such as HRA exemption, Section 80C (now Section 123) deductions, Section 80D (now Section 126) deductions, and certain housing loan interest can reduce taxable income if their conditions are met. HRA exemption is the least of actual HRA, rent paid minus 10% of salary, or 50% of salary for metro cities and 40% elsewhere.

For the ₹12,00,000 CTC illustration above, the new regime produces nil regular tax after rebate on the stated assumptions. The old regime does not automatically give a better result; it becomes worth testing only after entering the employee’s actual rent, eligible investments, insurance and housing-loan details.

Employees should submit their intended regime to payroll by the employer’s stated declaration deadline; no universal government rule was found requiring every employee to declare by 30 April. The choice used for employer TDS is a payroll intimation, while eligible non-business taxpayers can make the final regime choice in the income-tax return under the applicable rules.

Professional tax is imposed under state law, so the deduction on a salary slip depends on the employee’s work state and salary band. The amount actually paid is deductible from salary income when that deduction is available, including under the old regime.

In West Bengal, the official employee schedule shows nil up to ₹10,000 monthly salary, then ₹110, ₹130, ₹150 or ₹200 a month across the higher notified bands; salary above ₹40,000 attracts ₹200 a month.

In Maharashtra, an employee earning above ₹10,000 a month generally pays ₹200 per month except ₹300 in February, totalling ₹2,500 a year under the official schedule updated through 31 March 2025.

The tax might differ across States.

This is the part of the employee's salary that the company pays as a token of appreciation for the services rendered to the company during the tenure of employment. It is mainly defined as the benefit provided to the employee at the time of their retirement. Under the Income Tax Act, an employee is eligible to receive the gratuity amount after the completion of 5 or more years of full-time employment at an organisation. Read more: What Is Gratuity In Salary? How to calculate? Eligibility Criteria for Gratuity

Updated legal note: the four labour codes took effect on 21 November 2025. The five-year condition remains relevant for regular employees, but fixed-term employees are eligible for gratuity after one year of continuous service; the revised definition of wages applies to gratuity calculations from the effective date.

The common 4.81% CTC provision is an estimate based on a traditional annual accrual calculation, not a guaranteed monthly payment. The actual amount payable depends on the governing law, eligible wages, service and the event that makes gratuity due.

When comparing offers, ask for fixed annual cash, target variables, employer contributions, non-cash benefits and a month-by-month payroll simulation under your expected tax regime. That comparison is more reliable than ranking offers by CTC alone.

Start with the fixed component. Ask whether variable pay can be reduced and moved into a fixed salary, and confirm whether the quoted incentive is target pay or guaranteed pay.

Request a 12-month salary simulation showing gross earnings, employee PF, professional tax, TDS, bonus month and expected bank credit. This is an employer-specific document, so no official government format exists for it.

If employer NPS is available, ask whether it is inside or outside CTC and what percentage of salary will be contributed. Section 80CCD(2) permits a deduction up to 14% of salary for employees taxed under the new regime, subject to the provision’s conditions.

Clarify whether group insurance is included in CTC or offered over and above it. Employer-paid group-insurance premiums are not regarded as a taxable perquisite, but they still do not become monthly cash.

For a joining bonus, ask for the payout date, repayment or clawback period and the amount expected after payroll withholding. No single statutory TDS percentage applies to a salary joining bonus; it is included in the employer’s annual salary-tax estimate.

Also Read: How to Calculate In-Hand Salary from CTC?

With access to all defining parameters, calculating your salary beforehand is easy. Understanding terms like gross and net salary helps you make better financial decisions over time. You can opt for tax-saving programs, set wealth goals, and plan for contingencies.

Before accepting an offer, compare fixed monthly cash, variable pay, employer-funded benefits and estimated TDS—not only the headline CTC. A one-page payroll simulation can prevent most surprises on the first salary day.

Also Read: How to budget your salary for maximum savings?