CTC is not salary
Cost to Company is what you cost your employer. A meaningful slice of it never touches your account: the employer's provident fund contribution goes into your PF, and the gratuity provision sits with the company until you have completed five years.
On a ₹12 lakh CTC with a 40% basic, roughly ₹80,000 a year is accounted for before payroll even begins.
How it breaks down
In-hand = Gross − employee PF − professional tax − income tax
employer PF = employee PF = 12% of basic
gratuity = 4.81% of basic
Worked example
₹12,00,000 CTC, 40% basic
- Annual CTC
- ₹12,00,000
- Basic
- ₹4,80,000
- Less employer PF
- − ₹57,600
- Less gratuity provision
- − ₹23,088
- Gross salary
- ₹11,19,312
- Less employee PF and professional tax
- − ₹60,000
- Monthly in-hand (before tax)
- ₹88,276
Why the basic percentage matters
Almost every deduction is a percentage of basic, so a higher basic means more going into PF and less reaching your account each month — while your retirement corpus grows faster.
| Basic as % of CTC | Effect on take-home | Effect on PF |
|---|---|---|
| 30–35% | Higher monthly | Smaller corpus |
| 40–45% | Balanced | Balanced |
| 50%+ | Lower monthly | Larger corpus |
Neither is better in the abstract. A higher basic is deferred pay, not lost pay.
Reading an offer honestly
- Ask for the monthly in-hand figure, not the CTC, and get it in writing.
- Check what is included. Some CTCs count insurance premiums, meal cards and even notional stock value.
- Watch variable pay. A CTC with 20% variable is not the same as one that is fully fixed.
- Confirm the gratuity treatment. If you leave before five years, that provision never becomes yours.
For the tax figure, run the Income Tax Calculator first and bring the result back here.
Frequently asked questions
Why is my in-hand so much lower than my CTC?
Employer PF and the gratuity provision sit inside CTC but never reach your account, and employee PF, professional tax and income tax come out of what remains.
What percentage of CTC is usually basic?
Commonly 40% to 50%. It is set by your employer and shown on the offer letter.
Is professional tax the same everywhere?
No. It is a state levy, typically ₹200 a month where it applies, and a few states do not charge it at all.
Do I get the employer's PF contribution back?
Yes — it accrues to your PF account and is yours, subject to withdrawal rules. It is savings, not a deduction.