Why is in-hand salary lower than CTC?
CTC (Cost to Company) is everything your employer spends on you, including amounts you don't receive every month:
- Employer PF – 12% of basic goes into your EPF account (often capped at ₹1,800/month).
- Gratuity – about 4.81% of basic, paid only when you leave after 5+ years of service.
- Employee PF – another 12% of basic is deducted from your salary for your EPF account.
- Professional tax – a state tax, up to ₹2,500 a year (₹200/month in most states; nil in some).
- Income tax (TDS) – deducted monthly based on your expected yearly tax.
Assumptions
Tax is calculated under the new tax regime for FY 2025-26, with the ₹75,000 standard deduction and the section 87A rebate (no tax up to ₹12 lakh taxable income), plus 4% cess. Bonuses, variable pay and reimbursements are treated as part of the regular salary. Use the income tax calculator to compare with the old regime.