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Salary Negotiation

CTC vs In-Hand Salary in India: Understanding the Difference

Quick Answer

CTC (Cost to Company) includes everything: base salary, HRA, PF (employer share), insurance, gratuity, and variable pay. In-hand salary is what you actually receive after deductions — typically 65-75% of CTC. A ₹10 LPA CTC translates to approximately ₹65K-75K monthly in-hand, depending on the structure.

By ResumeGyani Career Experts

|17 February 2026

The gap between CTC and in-hand salary is one of the most confusing aspects of Indian compensation for new professionals. Understanding this breakdown is essential for comparing offers accurately and managing personal finances.

Typical CTC components: Basic Salary (40-50% of CTC — this determines PF, gratuity, and HRA calculations), HRA — House Rent Allowance (typically 40-50% of basic — partially tax exempt if you pay rent), PF — Provident Fund (12% of basic from your salary + 12% employer contribution — both counted in CTC), Special Allowance/Flexible Pay (variable component to fill the remaining CTC), Performance Bonus/Variable Pay (0-20% of CTC — not guaranteed), Gratuity (4.81% of basic — applicable after 5 years but counted in CTC from day one), and Insurance Premium (company-paid health and life insurance — counted in CTC).

Deductions from gross salary: Employee PF contribution (12% of basic), Professional Tax (₹200/month in most states), Income Tax (TDS — based on your tax slab and declarations), and Employee insurance premium (if applicable).

Example breakdown — ₹12 LPA CTC: Basic Salary: ₹5,00,000 (₹41,667/month). HRA: ₹2,50,000 (₹20,833/month). Special Allowance: ₹2,10,000 (₹17,500/month). Employer PF: ₹60,000 (₹5,000/month). Gratuity: ₹24,000 (₹2,000/month). Insurance: ₹36,000 (₹3,000/month). Variable Pay: ₹1,20,000. Gross Monthly Salary: ₹80,000. Minus PF (₹5,000) + Professional Tax (₹200) + TDS (₹12,500 approx under new regime) = In-hand: ~₹62,300/month (approximately 62% of CTC).

This means the ₹12 LPA CTC translates to approximately ₹7.5 LPA in-hand — a significant gap that you must account for when evaluating offers.

Key Points to Remember

In-hand salary is typically 65-75% of CTC
Basic salary determines PF, gratuity, and HRA calculations
PF includes both employee (12%) and employer (12%) contribution on basic
Variable/bonus pay may not be guaranteed — clarify during offer discussion
Gratuity is counted in CTC but payable only after 5 years of service
Higher basic = higher PF deduction but better retirement savings
Always calculate in-hand before comparing offers
Ask HR for the exact CTC breakup before accepting an offer

CTC Breakdown Example (₹12 LPA)

Component	Annual (₹)	Monthly (₹)	% of CTC
Basic Salary	5,00,000	41,667	42%
HRA	2,50,000	20,833	21%
Special Allowance	2,10,000	17,500	18%
Employer PF	60,000	5,000	5%
Gratuity	24,000	2,000	2%
Insurance	36,000	3,000	3%
Variable/Bonus	1,20,000	10,000	10%
Total CTC	12,00,000	1,00,000	100%
Approx In-Hand	7,47,600	62,300	62%

Pro Tips

Always ask for the detailed CTC breakup before accepting — the same CTC can have very different in-hand amounts based on structure

Compare offers using in-hand salary, not CTC — a ₹15 LPA CTC with 20% variable may give less in-hand than ₹13 LPA CTC with 5% variable

Higher basic salary = more PF savings (retirement benefit) but lower in-hand. Decide based on your financial priorities

Use online salary calculators (like the one on AmbitionBox) to quickly estimate in-hand from CTC

Frequently Asked Questions

Is employer PF contribution part of my salary?

Yes, it's part of CTC and contributes to your PF corpus. While it reduces your in-hand salary, it's building your retirement savings with 8.5%+ annual returns.

Is variable pay guaranteed?

It depends on the company and your performance. Some companies pay 100% variable if targets are met, others have complex formulas. Ask HR: 'What percentage of variable was paid out last year on average?'

How can I increase my in-hand salary?

Opt for a salary structure with lower basic (reduces PF deduction) and higher special allowance. However, this reduces your PF savings. Alternatively, maximize tax-saving investments under Section 80C, 80D, etc.