What is CTC (Cost to Company)?

CTC (Cost to Company) is the total expenditure a company incurs on an employee annually. It includes your basic salary, allowances (HRA, special allowance), employer's EPF/ESI contribution, gratuity, insurance, and any other perks. Your actual take-home salary (in-hand pay) is significantly less than CTC because of these deductions.

Typical CTC Breakup in India

Basic Salary: 40–50% of CTC. This is the foundation for EPF, HRA, and gratuity calculations.
HRA (House Rent Allowance): 40–50% of basic. Tax-exempt if you pay rent (subject to conditions).
Special Allowance: The balance after basic, HRA, EPF, and gratuity are deducted from CTC. Fully taxable.
Employer EPF: 12% of basic salary (capped at ₹15,000 basic for statutory limit). Paid by employer, part of CTC.
Employer NPS: Optional. Up to 14% of basic in the new regime (old regime: 10%, or 14% for government employees). Deductible under 80CCD(2) in both tax regimes.
Gratuity: 4.81% of basic salary. Payable after 5 years of service.

In-Hand Salary Formula

In-Hand = CTC − Employer EPF − Employer NPS − Gratuity − Employee EPF − Professional Tax − Income Tax

Income Tax Slabs FY 2025-26

New Tax Regime (Default)

Income Slab	Tax Rate
Up to ₹4,00,000	Nil
₹4,00,001 – ₹8,00,000	5%
₹8,00,001 – ₹12,00,000	10%
₹12,00,001 – ₹16,00,000	15%
₹16,00,001 – ₹20,00,000	20%
₹20,00,001 – ₹24,00,000	25%
Above ₹24,00,000	30%

New regime offers a standard deduction of ₹75,000 and rebate u/s 87A for income up to ₹12,00,000 (effective zero tax up to ₹12,75,000).

Old Tax Regime

Income Slab	Tax Rate
Up to ₹2,50,000	Nil
₹2,50,001 – ₹5,00,000	5%
₹5,00,001 – ₹10,00,000	20%
Above ₹10,00,000	30%

Old regime allows deductions under 80C (₹1.5L), 80D (health insurance), HRA exemption, and standard deduction of ₹50,000.

New vs Old Tax Regime — Which Should You Choose?

The right tax regime depends on your total deductions. Here’s a comparison to help you decide:

Feature	New Regime	Old Regime
Standard Deduction	₹75,000	₹50,000
Section 80C	Not available	Up to ₹1.5L
Section 80D (Health)	Not available	Up to ₹75,000
HRA Exemption	Not available	Available
NPS 80CCD(1B)	Not available	Extra ₹50,000
Home Loan 80EEA	Not available	Up to ₹1.5L interest
Tax Rates	Lower (5–30%)	Higher (5–30%)
Rebate u/s 87A	Up to ₹12L income	Up to ₹5L income
Best For	Most salaried earners; zero tax up to ₹12.75L salary	Very large deductions (about ₹5.4L+ at ₹15L salary, ₹8L+ at ₹25L+)

Quick Decision Rule

Add up all your deductions: 80C (EPF + PPF + ELSS) + 80D + HRA exemption + NPS 80CCD(1B) + home loan interest. If the total is:

Salary up to ₹12.75 lakh: Choose New Regime (tax is zero after the ₹75,000 standard deduction and the 87A rebate)
Salary ₹15–20 lakh: Old Regime wins only if deductions exceed about ₹5.4 lakh (at ₹15L) to ₹7 lakh (at ₹20L)
Salary ₹25 lakh and above: Old Regime needs about ₹8 lakh of deductions; near the line, calculate both using this tool

CTC to In-Hand Salary at Different Levels

Here’s what employees typically take home at different CTC levels under the new tax regime, using the calculator’s defaults (FY 2025-26 slabs, 40% basic, EPF at 12% of the ₹15,000 wage ceiling, ₹2,400 professional tax, no variable pay):

Annual CTC	Monthly CTC	Monthly In-Hand (Approx)	Take-Home %
₹4,00,000	₹33,333	₹29,300	88%
₹6,00,000	₹50,000	₹45,200	90%
₹10,00,000	₹83,333	₹77,900	94%
₹15,00,000	₹1,25,000	₹1,11,300	89%
₹20,00,000	₹1,66,667	₹1,44,700	87%
₹30,00,000	₹2,50,000	₹2,03,800	82%
₹50,00,000	₹4,16,667	₹3,16,300	76%

Approximate values. Actual take-home varies based on exact salary structure, deductions, HRA, and employer policies. Use the calculator above for precise results.

Professional Tax by State

Professional tax is a state-level tax deducted from salaried employees. Here’s a quick reference:

State	Annual Professional Tax	Notes
Maharashtra	₹2,500	₹200/mo (Feb: ₹300)
Karnataka	₹2,400	₹200/month
West Bengal	₹2,400	Slab-based (₹110–200/mo)
Tamil Nadu	₹2,500	Half-yearly payment
Telangana	₹2,500	₹200/mo (Feb: ₹300)
Andhra Pradesh	₹2,500	Slab-based
Gujarat	₹2,400	₹200/month
Kerala	₹2,500	Half-yearly payment
Madhya Pradesh	₹2,500	Slab-based
Delhi	Nil	No professional tax
Rajasthan	Nil	No professional tax
Uttar Pradesh	Nil	No professional tax
Haryana	Nil	No professional tax

Maximum professional tax is capped at ₹2,500/year by the Constitution. Professional tax paid is deductible from taxable income only under the old regime; the new regime allows just the standard deduction.

Salary Calculation Examples

Example 1: CTC ₹12,00,000 (New Regime)

Basic (40%): ₹4,80,000/yr → ₹40,000/month
HRA (50% of Basic): ₹2,40,000/yr → ₹20,000/month
Employer EPF (12% of the ₹15,000 wage ceiling): ₹21,600/yr
Gratuity (4.81%): ₹23,088/yr
Special Allowance: ₹4,35,312/yr
Employee EPF: ₹21,600/yr
Professional Tax: ₹2,400/yr
Taxable Income (new): ₹12,00,000 − ₹21,600 − ₹23,088 − ₹75,000 = ₹10,80,312
Income Tax: ₹0 (taxable income is below ₹12 lakh, so the 87A rebate cancels it)
Monthly In-Hand ≈ ₹94,300

Example 2: CTC ₹6,00,000 (New Regime)

Basic: ₹2,40,000 | HRA: ₹1,20,000
Taxable income after the ₹75,000 standard deduction is about ₹4,91,900, well under ₹12 lakh → Zero tax (87A rebate)
Monthly In-Hand ≈ ₹45,200

Example 3: CTC ₹20,00,000 (Old vs New with Deductions)

Basic (40%): ₹8,00,000 | HRA: ₹4,00,000 | Rent: ₹30,000/mo (Metro)
HRA Exemption: min(₹4L, ₹4L, ₹2.8L) = ₹2,80,000
80C: ₹1,50,000 (EPF + PPF + ELSS)
80D: ₹25,000 (health insurance)
NPS 80CCD(1B): ₹50,000
Deductions: ₹5,05,000 on top of the ₹50,000 standard deduction, below the roughly ₹6.9 lakh the old regime needs at this salary
Monthly In-Hand ≈ ₹1,40,000 (old regime) vs ₹1,44,700 (new regime), so the new regime still wins

Understanding Your Payslip Components

Your monthly payslip contains several components. Here’s what each one means:

Basic Salary: The fixed core component. It determines EPF, HRA, gratuity, and many other calculations. Higher basic = higher retirement savings but higher tax.
HRA (House Rent Allowance): Compensation for housing costs. Partially or fully tax-exempt if you live in rented accommodation — but only under the old tax regime.
Special Allowance / Flexible Pay: The catch-all component that fills the gap between CTC and other defined components. Fully taxable with no exemptions.
Conveyance Allowance: For commuting expenses. Some companies still include this separately, though it’s now subsumed into the standard deduction.
Medical Allowance: ₹15,000/year was tax-free earlier, now merged into standard deduction.
Performance Bonus / Variable Pay: Usually 10–20% of CTC, paid quarterly or annually. Fully taxable. Not included in monthly in-hand calculations.
Employee EPF Deduction: 12% of basic (capped). This goes into your PF account — it’s savings, not a loss.
TDS (Tax Deducted at Source): Monthly income tax deducted by employer based on your declared investments and tax regime choice.

Tips to Increase Your Take-Home Salary

Negotiate salary structure: Ask for higher special allowance and lower basic if you want more in-hand (but this reduces EPF/gratuity).
Claim HRA exemption: If you pay rent, claim HRA under old regime. Even if you live with parents, you can pay rent to them (they must declare it as income).
Choose the right tax regime: The old regime only saves more with large deductions (80C + 80D + HRA + NPS + home loan): roughly ₹5.4 lakh at a ₹15 lakh salary and ₹8 lakh at ₹25 lakh and above.
Invest in NPS: Extra ₹50,000 deduction under 80CCD(1B) in old regime. Employer NPS (up to 14%) is exempt in both regimes.
Opt for food coupons/meal cards: Up to ₹2,200/month is tax-free through employer-provided meal vouchers.
Claim LTA: Leave Travel Allowance covers domestic travel expenses, exempt twice in a block of 4 years (old regime only).
Submit investment proofs on time: Many employees lose money because they don’t submit 80C/80D proofs before the employer’s deadline, resulting in higher TDS.
Opt for employer NPS contribution: Ask your employer to restructure part of your special allowance as employer NPS contribution (up to 14% of basic) — this is tax-exempt in both regimes.

Common Salary Mistakes to Avoid

Comparing CTC, not in-hand: Two job offers at ₹15L CTC can have very different take-home salaries depending on the salary structure (higher basic = more EPF deduction = lower in-hand but better retirement savings).
Ignoring the variable component: If 20% of CTC is variable/bonus, your guaranteed monthly income is lower. Factor this into EMI and expense planning.
Not declaring investments for TDS: If you don’t declare your 80C investments at the start of the year, the employer deducts higher TDS monthly. You’ll get it back as a refund, but your monthly cash flow suffers.
Choosing old regime without enough deductions: Many people default to old regime thinking “more deductions = more savings” but if your deductions are below the break-even for your salary (about ₹5.4 lakh at ₹15 lakh, ₹8 lakh at ₹25 lakh and above), you’re actually paying more tax.
Not accounting for ESI: For CTC up to ₹21,000/month, Employee State Insurance (ESI) applies at 0.75% — this is an additional deduction many don’t expect.
Forgetting that gratuity isn’t liquid: Gratuity is part of CTC but only paid after 5 years of service. If you switch jobs before 5 years, you effectively lose this component.

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Frequently Asked Questions

CTC (Cost to Company) is the total amount a company spends on an employee per year. It includes basic salary, HRA, special allowances, EPF employer contribution, gratuity, insurance, and other benefits. Your in-hand salary is always less than CTC: roughly 76–94% for the simple structure in the table above, and lower if your CTC also includes variable pay, insurance or other benefits.

In-hand = CTC − Employer EPF − Gratuity − Employee EPF − Professional Tax − Income Tax. The employer EPF and gratuity are part of CTC but never reach your bank account. The remaining deductions (employee EPF, prof. tax, TDS) are taken from your gross salary.

For most people the new regime is better under FY 2025-26 slabs: a salary up to ₹12.75 lakh pays no tax, and the old regime only saves more when your deductions (80C + 80D + HRA exemption + NPS + home loan) are large, about ₹5.4 lakh at a ₹15 lakh salary, ₹7 lakh at ₹20 lakh and ₹8 lakh at ₹25 lakh and above. Use this calculator with both options to compare exact numbers for your specific salary.

Professional tax is a state-level tax on salaried individuals capped at ₹2,500/year by the Constitution. Most states charge ₹200/month (₹2,400/year). Maharashtra and some states charge ₹2,500/year. States like Delhi, Rajasthan, UP, and Haryana don’t levy professional tax at all.

Section 80C allows deductions up to ₹1.5 lakh per year on investments like EPF, PPF, ELSS mutual funds, life insurance premiums, NSC, tax-saving FDs, home loan principal repayment, and children’s tuition fees. Available only under the old tax regime. EPF contribution by the employee is automatically counted under 80C.

HRA exemption = minimum of: (1) Actual HRA received from employer, (2) 50% of basic for metro cities (Delhi, Mumbai, Kolkata, Chennai; from Tax Year 2026-27 also Bengaluru, Pune, Hyderabad and Ahmedabad) or 40% elsewhere, (3) Actual rent paid minus 10% of basic salary. This exemption is only available under the old tax regime, and you must be paying actual rent.

With the calculator’s default structure (40% basic, EPF on the ₹15,000 wage ceiling, no variable pay) it is about 88–94% up to ₹15L CTC under the new regime, because the 87A rebate cancels the tax when taxable income is up to ₹12 lakh. It falls to about 87% at ₹20L, 82% at ₹30L and 76% at ₹50L as more income is taxed at 25–30%. EPF on full basic, variable pay or benefits in the CTC all lower the share.

EPF is mandatory for establishments with 20+ employees and for employees with basic salary up to ₹15,000/month at the time of joining. For employees above this threshold, EPF is optional but most companies enroll all employees. Contribution is 12% of basic from both employer and employee.

Gratuity is a lump sum payment equal to (Basic × 15/26 × years of service) paid by the employer when an employee leaves after 5+ years of continuous service. It’s provisioned monthly as part of CTC but paid only on exit. Gratuity up to ₹20 lakh is tax-free.

Higher basic = more EPF savings + higher HRA exemption + higher gratuity, but lower monthly in-hand. Higher special allowance = more in-hand now but fully taxable with no exemptions. If you’re under 35 and can afford lower in-hand, higher basic builds better retirement savings. If cash flow is priority, negotiate for more special allowance.

CTC to In-Hand Salary