CTC vs In-Hand Salary: Why Your Take-Home Is Less Than Your CTC
Short answer: CTC is what your employer spends on you in a year. Your in-hand salary is what is left after the employer’s PF share, your own PF, professional tax and income tax. On a ₹12 lakh CTC with a 40% basic, you take home ₹90,200 a month (90.2% of CTC) under the new tax regime. On ₹25 lakh CTC you take home about ₹1,64,192 a month.
What is inside your CTC
CTC (cost to company) is a total, not a payment. It usually includes your basic salary and allowances, your employer’s PF contribution, and sometimes gratuity, group insurance and variable pay. Only part of it is paid to you every month. The rest is either paid to a fund on your behalf, or paid later, or paid only if targets are met.
From CTC to in-hand, step by step
Take a ₹12 lakh CTC with basic at 40%. Your basic is ₹40,000 a month. Your employer pays 12% of that, ₹4,800, into your PF, and this sits inside the CTC. Take that out and your gross salary is ₹95,200 a month. Your own PF is another ₹4,800, professional tax is about ₹200, and income tax is ₹0 because your taxable income is below the ₹12 lakh rebate limit. You are left with ₹90,200 a month. The salary calculator shows every line.
How in-hand changes with CTC
| CTC | In-hand per month | Income tax per month | Your PF per month | In-hand as % of CTC |
|---|---|---|---|---|
| ₹6 lakh | ₹45,000 | ₹0 | ₹2,400 | 90% |
| ₹12 lakh | ₹90,200 | ₹0 | ₹4,800 | 90.2% |
| ₹15 lakh | ₹1,05,611 | ₹7,189 | ₹6,000 | 84.5% |
| ₹25 lakh | ₹1,64,192 | ₹23,942 | ₹10,000 | 78.8% |
The share you take home falls as CTC rises, because tax grows faster than pay. Up to about ₹12.75 lakh of salary there is no income tax in the new regime. Above that, the tax rises quickly.
Your PF can change your in-hand
Some employers work PF on your full basic. Others work it on the wage ceiling, which is ₹25,000 a month from 17 September 2026, so the most you pay is ₹3,000. On the same ₹12 lakh CTC, PF on the ceiling gives ₹93,800 a month in hand, against ₹90,200. That looks better, but it means less money goes into your retirement account. Use the EPF calculator to see what that costs you at retirement.
New regime or old regime?
Most salaried people with few deductions keep more in hand under the new regime. At ₹12 lakh CTC, the old regime with ₹1.5 lakh of deductions leaves less in hand than the new regime, because the new regime’s tax is nil. The old regime can win if you claim a large HRA exemption, home-loan interest and 80C together. Compare both with the income tax calculator, and use the HRA calculator to find your exemption.
Questions to ask before you accept an offer
- How much of the CTC is fixed pay, and how much is variable?
- Is the employer PF inside the CTC, and is it on full basic or on the ceiling?
- Are gratuity and insurance inside the CTC?
- What is the basic salary? A higher basic raises PF, gratuity and HRA exemption, but lowers cash in hand.
Common mistakes
- Dividing CTC by 12 and treating it as monthly pay.
- Counting variable pay or a joining bonus as monthly income.
- Ignoring professional tax. It is small, but it is real.
Your payslip is the final word, because employers differ in structure and in how they work out tax month by month.
Keep reading
- DA Hike to 63% From July 2026: What Changes for Your Pay and Arrears — Government pay, 5 min read
- Section 80C Explained: What You Can Claim Up to ₹1.5 Lakh — Income tax, 6 min read
- New vs Old Tax Regime for FY 2025-26 (AY 2026-27): Which Is Better? — Income tax, 7 min read
- Gratuity Calculation Formula: The 15/26 Rule Explained With Examples — Salary and retirement, 6 min read
Frequently asked questions
How much is the in-hand salary for ₹12 lakh CTC?
About ₹90,200 a month, assuming a 40% basic, PF on the full basic, ₹200 professional tax and the new tax regime. Your own structure can change this.
Why is in-hand salary lower than CTC divided by 12?
Because CTC includes your employer’s PF share and sometimes gratuity, insurance and variable pay, and because your own PF, professional tax and income tax are cut from what is left.
Is there tax on a ₹12 lakh salary?
In the new regime, taxable income up to ₹12 lakh has no tax because of the section 87A rebate, and the ₹75,000 standard deduction means salaries up to ₹12.75 lakh are tax-free.
Can I increase my in-hand salary legally?
You can compare the two tax regimes, ask for a structure with more fixed pay, and check whether your PF is on the full basic or the ceiling. Do not skip PF if your employer requires it.
Sources: Income Tax Department · EPFO — contributions and wage ceiling · PIB — EPFO wage ceiling raised to ₹25,000