CTC is what you cost your employer. It is not what you earn. The gap is structural, not sneaky. Three parts of a typical CTC never reach your account in the month they are counted. The employer’s provident fund contribution. The gratuity provision. Any insurance premium the company pays for you. A ₹20 lakh CTC commonly lands near ₹1.3–1.4 lakh a month in hand. Our take-home salary calculator does this split for your own package. The main reason is simple: about a fifth of the package is deferred, or paid to somebody else on your behalf.
| Standard deduction, salaried, new regime | ₹75,000 |
|---|---|
| What it means | FY 2026-27 — applies before slab tax on salary income |
| EPF, employee + employer | 12% + 12% — Of basic wages; only your 12% is a deduction from gross |
| EPS wage ceiling | ₹15,000/month — 8.33% of the employer share, capped at ₹1,250 |
| Gratuity vests after | 5 years — Counted in CTC from day one regardless |
as of 2026-08-17 · Income Tax Department · verified
What to know
Split the package into three buckets. The arithmetic is impossible to follow otherwise. Cash in hand is basic, HRA and allowances. Take off your own EPF, professional tax and TDS. Deferred money is the employer EPF contribution — which the EPF calculator compounds out to retirement — and the gratuity provision, which the gratuity calculator sizes against your years of service. That is genuinely yours in the end, but not this month — and gratuity is not yours at all unless you stay. The third bucket is money paid to others: group health and term cover. It has real value. It never appears in your account. Only the first bucket is take-home. A ₹20 lakh package routinely holds ₹2.5–3 lakh in the other two.
Gratuity is the line worth being blunt about. Many employers show it in CTC at about 4.81% of basic from day one. Under the Payment of Gratuity Act it is payable only after five years of continuous service. Most people in the Indian market now leave before that. If you go at three years, you were quoted money you were never going to get. Worse, the offer you compared it against may not have carried the same line. So strip gratuity out of both offers before you decide. Put it back only if you really expect to be there in year five.
The other distortion is the basic-pay ratio, and it cuts both ways. EPF is 12% of basic. So a low basic raises your take-home now. It also shrinks your retirement corpus, your gratuity and your HRA exemption headroom. A high basic does the reverse. There is no universally right answer. It turns on whether you need the cash now, and on your tax regime. Under the default new regime, most salary-linked exemptions including HRA do not apply. That removes much of the reason to engineer the structure at all. Under the old regime it can still be worth several thousand rupees a month. Run your own numbers through both regimes with the old vs new regime calculator. Do not just accept the structure HR hands you.
Frequently asked questions
Why is my in-hand salary so much lower than my CTC?
Because CTC counts money that never reaches you that month. The employer’s 12% EPF contribution. A gratuity provision you only get after five years. Insurance premiums paid on your behalf. Your own EPF, professional tax and TDS then come out of what is left. Together these commonly take 20–30% of the headline figure.
Is the employer’s PF contribution really my money?
Yes, but not now. It is credited to your EPF account and earns interest. It is yours on withdrawal or transfer, subject to EPFO rules. Part of the employer share goes to the pension scheme instead of your PF balance. That part is 8.33% of wages, capped at the ₹15,000 ceiling — so ₹1,250 a month. It follows pension rules, not lump-sum withdrawal rules.
Should I ask for a higher basic or a lower one?
A higher basic lifts EPF, gratuity and HRA exemption headroom. It also cuts your immediate take-home. A lower basic does the opposite. On the default new regime, HRA and most other exemptions do not apply. So the real trade-off is retirement saving against monthly cash. Decide on that, not on the size of the take-home number.
Sources
- Income Tax Department, Government of India — Salary income, standard deduction and the default tax regime (primary source)
- Employees’ Provident Fund Organisation — Employees’ Provident Funds Scheme — contribution rates and EPS wage ceiling (primary source)
- Ministry of Labour & Employment, Government of India — Payment of Gratuity Act, 1972 — eligibility and computation (primary source)
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