Why is my in-hand salary so much lower than my CTC?

Your CTC includes amounts your employer spends on you that never reach your bank account each month — the employer's PF contribution and the gratuity accrual, in particular. On top of that, your own PF contribution, professional tax, and income tax are deducted from what's left. The combined effect is usually a 10-20% gap between CTC divided by 12 and your actual monthly in-hand salary, before income tax is even considered.

Is PF contribution mandatory?

For most organized-sector employees in India, EPF (Employees' Provident Fund) contributions are mandatory once an establishment is covered under the EPF Act, typically once it has 20 or more employees. Both the employer and employee contribute, usually 12% of basic salary each, though the exact basis can vary if your employer applies the statutory wage ceiling.

Does every company structure CTC the same way?

No. While basic pay, PF, and gratuity are common across most Indian employers, companies differ in how they set the basic salary percentage, whether they cap PF contributions at the statutory wage ceiling, and whether they bundle additional items like insurance premiums, meal cards, or joining bonuses into CTC. Always check your specific salary structure or payslip rather than assuming a standard split.

Where does income tax fit into this calculation?

This calculator stops at your net annual (in-hand) salary before income tax — it only performs the structural CTC breakdown. Income tax is deducted separately by your employer through TDS, based on your applicable slab rate and regime. Use the Income Tax Calculator on the net annual figure from this page to estimate your actual post-tax take-home pay.

Why is gratuity accrual subtracted if I haven't received it yet?

Gratuity is a lump sum your employer is required to pay when you leave the company after completing five or more years of continuous service (with some exceptions). Because your employer sets this money aside as part of your CTC every year, it counts as a cost to the company — but since you don't receive it monthly, it's excluded from your gross and in-hand salary figures here.

Salary Calculator (CTC to In-Hand)

Break down your annual Cost to Company (CTC) into its structural components — basic pay, employer PF contribution, gratuity accrual, employee PF deduction and professional tax — to see the monthly gross and in-hand salary you can actually expect in your bank account.

Annual CTC As stated in your offer letter

₹

Basic Salary (% of CTC) Typically 40-50% of CTC

Employer PF Contribution (% of Basic) Usually 12%

Employee PF Contribution (% of Basic) Usually 12%

Professional Tax (per year) Varies by state — check your state's actual rate; enter 0 if not applicable.

₹

Fill in the form and select "Calculate" to see your results here.

What is CTC vs in-hand salary?

CTC (Cost to Company) is the total amount your employer spends on you in a year — it includes your basic pay, allowances, employer contributions to your provident fund, and the gratuity your employer sets aside for your eventual payout. In-hand salary (also called take-home pay or net salary) is what actually lands in your bank account each month, after employer-side contributions are removed from the CTC and your own contributions and deductions are subtracted from what's left.

The gap between the two can be large. A CTC of ₹12 lakh does not mean ₹1 lakh a month in your account — a meaningful chunk of that figure never touches your bank account at all, because it goes toward your employer's PF contribution and your gratuity accrual before your salary is even calculated.

Why Indian salary structures are confusing

Indian offer letters advertise the CTC figure because it looks larger and lets companies present a single, impressive number during hiring. But CTC bundles together components that behave very differently: some are paid to you monthly, some are paid to you only when you leave the company (gratuity), and some are paid on your behalf to a fund you can't access until retirement or resignation (employer PF). None of these employer-side amounts show up in your monthly salary slip as "income" you receive — they're costs the company incurs because it employs you, not cash it hands to you. Understanding this split is the first step to reading any Indian offer letter correctly.

How to use this calculator

Enter your annual CTC exactly as stated in your offer letter or appointment letter.
Enter your basic salary as a percentage of CTC (check your salary structure or payslip — this typically ranges from 40% to 50%).
Enter your employer's and your own PF contribution percentages (usually 12% of basic each, though some employers cap this at a statutory wage ceiling).
Enter your state's professional tax for the year, or 0 if your state doesn't levy one.
Select "Calculate Salary" to see your monthly gross salary, monthly in-hand salary, annual in-hand salary, and total annual deductions.

Formula

Basic Salary = Annual CTC × Basic % Employer PF = Basic Salary × Employer PF % Gratuity Accrual = Basic Salary × 4.81% (standard 15/26/12 approximation) Gross Annual Salary = Annual CTC − Employer PF − Gratuity Accrual Employee PF = Basic Salary × Employee PF % Net Annual (In-Hand) Salary = Gross Annual Salary − Employee PF − Professional Tax Monthly Gross Salary = Gross Annual Salary ÷ 12 Monthly In-Hand Salary = Net Annual Salary ÷ 12

This is a structural breakdown of CTC, not an income tax calculation. Use the Income Tax Calculator separately to estimate the tax due on the in-hand salary figure this calculator produces.

Example

Consider an annual CTC of ₹12,00,000, with basic salary set at 40% of CTC, employer and employee PF both at 12% of basic, and professional tax of ₹2,400 for the year.

Basic Salary = ₹12,00,000 × 40% = ₹4,80,000
Employer PF = ₹4,80,000 × 12% = ₹57,600
Gratuity Accrual = ₹4,80,000 × 4.81% = ₹23,088
Gross Annual Salary = ₹12,00,000 − ₹57,600 − ₹23,088 = ₹11,19,312
Employee PF = ₹4,80,000 × 12% = ₹57,600
Net Annual (In-Hand) Salary = ₹11,19,312 − ₹57,600 − ₹2,400 = ₹10,59,312
Monthly Gross Salary = ₹11,19,312 ÷ 12 = ₹93,276
Monthly In-Hand Salary = ₹10,59,312 ÷ 12 ≈ ₹88,276

So on a ₹12,00,000 CTC, the actual monthly in-hand salary works out to roughly ₹88,276 — well below the ₹1,00,000 a month that dividing the CTC by 12 might suggest, mainly because of the employer PF contribution and gratuity accrual that never reach the employee's account, plus the employee's own PF deduction and professional tax.

Factors that affect your take-home pay

Basic salary percentage. This varies by company and role. A higher basic percentage means higher PF contributions and gratuity accrual (which reduce in-hand pay), but also a higher HRA exemption base if you claim HRA under the old tax regime.
PF contribution caps. By law, employers can restrict PF contributions to a statutory wage ceiling (₹15,000 of basic per month) rather than calculating it on the full basic salary — check your payslip to see which basis your employer uses.
Professional tax by state. Professional tax is levied by state governments, so the amount (and whether it applies at all) depends on where you're employed. Several states, including Delhi and Haryana, do not levy professional tax.
Other CTC components not modeled here. Some employers bundle health insurance premiums, meal cards, or other benefits into CTC. This calculator only models the components listed above — if your CTC includes other deductions, your actual in-hand salary may be somewhat lower than this estimate.
Income tax. This calculator does not deduct income tax from your in-hand salary. Use the Income Tax Calculator to estimate the tax on the net annual figure produced here, then subtract it to get your true take-home pay.

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Tax calculations are estimates based on the selected financial year and the information entered. They do not account for every deduction, exemption, or edge case in the Income Tax Act, and are not a substitute for professional tax advice. See our full disclaimer.