CTC vs in-hand salary: why 12 LPA is not 1 lakh a month
An Indian job offer quotes cost to company, not what reaches your bank. What CTC includes, a worked example for 12 lakh, and how to estimate monthly in-hand pay.
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Tools for this job: Take-Home Pay Calculator · Salary Calculator
Indian job offers are usually stated as CTC, cost to company: everything the employer spends on you in a year. Divide 12 LPA by twelve and you expect 1 lakh a month. The first salary credit is noticeably less, and not mainly because of income tax.
What CTC includes
- Gross salary: basic pay, house rent allowance, special allowance and other allowances.
- Employer's provident fund contribution: 12% of basic pay, paid into your PF account, not to you.
- Gratuity provision: often shown as 4.81% of basic, but only paid when you leave after qualifying service, usually five years.
- Variable pay and benefits: performance bonus, insurance premiums, meal cards. Variable pay depends on targets and may be paid yearly.
Worked example: 12 lakh CTC
Assume basic pay is 50% of CTC (6,00,000), no variable pay, the new tax regime, and professional tax of 2,500 a year.
| Item | Per year |
|---|---|
| CTC | 12,00,000 |
| Less employer PF (12% of basic) | −72,000 |
| Less gratuity (4.81% of basic) | −28,860 |
| Gross salary | 10,99,140 |
| Less employee PF | −72,000 |
| Less professional tax | −2,500 |
| Income tax (new regime) | 0 |
| In-hand | 10,24,640 |
That is about 85,400 a month. Income tax is zero because, after the 75,000 standard deduction, taxable income is under 12 lakh, where the section 87A rebate cancels the tax for FY 2026–27. The gap from 1 lakh a month is almost all provident fund and gratuity, which are still your money, just not this month.
At higher salaries
On the same structure, 18 lakh CTC gives a gross salary of about 16.5 lakh and taxable income of about 15.7 lakh. Tax plus cess comes to about 1,20,700, and in-hand pay is about 14.2 lakh, or roughly 1,18,100 a month. Once taxable income passes 12 lakh, the rebate stops applying (apart from marginal relief just above the line) and tax is charged through every slab.
Estimate your own
- Ask HR for the salary breakup: basic, allowances, employer PF, gratuity, variable pay.
- Subtract employer PF, gratuity and any variable pay from CTC to get the fixed gross.
- Enter the gross in the Take-Home Pay Calculator with India selected, your regime, employee PF and professional tax.
- Divide the annual take-home by 12.
Things that change the figure
- PF on capped wages. Some employers calculate PF on a wage ceiling of 15,000 a month (1,800 a month each side) rather than on full basic. That raises in-hand pay.
- Old tax regime. With large deductions for 80C investments, health insurance and HRA, the old regime can still be cheaper. The calculator lets you compare both.
- Variable pay is not guaranteed and is often paid once a year.
- Professional tax depends on the state; some states do not levy it.
Comparing offers? Compare fixed in-hand pay first, then the benefits. For converting between yearly, monthly and hourly figures, use the Salary Calculator.