Job offers quote CTC; your rent gets paid from in-hand salary. The gap between the two is a stack of deductions — employer PF, employee PF, gratuity provisioning, professional tax and income tax (TDS). Once you can compute each layer, no offer letter can surprise you. This guide walks a full ₹12 lakh CTC through every deduction, under both tax regimes.
What CTC actually contains
CTC (Cost to Company) bundles everything the employer spends on you — including money that never touches your account:
- Basic salary — usually 40–50% of CTC; drives PF, gratuity and many allowances.
- House Rent Allowance (HRA) — taxable, but partly exempt if you pay rent (see our HRA exemption calculator).
- Special allowance — the balancing figure; fully taxable.
- Employer PF (12% of basic) and gratuity provisioning (4.81% of basic) — in the CTC, not in your bank.
- Variable pay / bonus — typically 5–15% of CTC, paid on appraisal outcomes.
The five deductions between CTC and in-hand
| Deduction | Typical rate | Goes to |
|---|---|---|
| Employee EPF | 12% of basic (+ DA) | Your EPF account (yours, but locked) |
| Employer EPF | 12% of basic | EPF (8.33% to EPS pension) |
| Gratuity provision | 4.81% of basic | Payable after 5 years’ service |
| Professional tax | ₹200/month (most states) | State government |
| Income tax (TDS) | Slab-based, regime-dependent | Central government |
Worked example: ₹12 lakh CTC, ₹50,000 basic
Take a ₹12,00,000 CTC with basic = ₹50,000/month. Monthly layers: employee EPF 12% × 50,000 = ₹6,000; employer EPF ₹6,000 and gratuity ₹2,405 sit inside CTC but outside your pay; professional tax ₹200. Gross taxable salary after standard deduction (₹75,000) ≈ ₹10.3 lakh.
New regime tax: after slabs and 4% cess ≈ ₹40,000/year ≈ ₹3,300/month. In-hand ≈ ₹41,500/month (after employee PF, PT and TDS) — about 50% of the headline "₹1 lakh/month" the CTC implies, with variable pay adding more on payout months. Old regime with ₹1.5L 80C + ₹25k 80D + HRA exemption typically lands within ₹2,000–4,000 of the new regime at this income — run both before choosing, because the Income Tax Calculator computes both regimes side by side in seconds.
Rule-of-thumb conversion for any CTC
- First cut: in-hand ≈ 70–75% of monthly gross (CTC ÷ 12) after PF and gratuity mechanics.
- Second cut: subtract TDS — roughly 0% up to ₹7–8 lakh CTC (87A rebate), 5–8% around ₹12 lakh, 10–15% around ₹20 lakh, new regime.
- Variable pay never counts toward monthly in-hand — budget it as bonus, not salary.
Related: Income Tax Calculator India: New vs Old Regime Guide · HRA Exemption Calculator · Professional Tax Calculator