Understanding CTC vs Take Home Salary
CTC (Cost to Company) is the total expense a company incurs for an employee annually. However, your take-home salary is significantly lower due to various deductions and employer contributions that you never receive directly.
Components of CTC
- Basic Salary: Foundation of salary structure, typically 40-50% of CTC. EPF, gratuity, and bonus are calculated on basic.
- HRA (House Rent Allowance): Usually 40-50% of basic. Tax exempt based on actual rent paid.
- Special Allowance: Fully taxable flexible component to make up the rest.
- Employer PF: 12% of basic (8.33% EPS + 3.67% EPF). Part of CTC but credited to your PF account.
- Gratuity: 4.81% of basic (15/26 days per year). Paid only after 5 years.
- Insurance: Group health/term insurance premiums, typically ₹15,000-50,000/year.
Deductions from Salary
| Deduction | Rate/Amount | Paid To |
|---|---|---|
| Employee PF | 12% of Basic + DA | EPFO (Your account) |
| Professional Tax | ₹200/month (max ₹2,500/yr) | State Government |
| Income Tax (TDS) | As per tax slab | Income Tax Department |
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% |
Note: Standard deduction of ₹75,000. Section 87A rebate up to ₹60,000 for income ≤ ₹12 lakh makes it effectively tax-free up to ₹12.75 lakh for salaried.
Frequently Asked Questions (FAQs)
What percentage of CTC is take home salary?
Typically 60-75% of CTC depending on salary structure and tax bracket. Higher CTC = lower percentage due to higher tax. CTC of ₹12 lakh may give ~₹9.4 lakh take home, while ₹24 lakh CTC may give ~₹16 lakh take home.
Is employer PF part of my salary?
Employer PF (12% of basic) is part of CTC but not your in-hand salary. It goes to your EPF account and you can access it under certain conditions or at retirement. It earns 8.25% interest tax-free.
How to increase take home salary?
1) Restructure salary with lower basic (less PF deduction), 2) Maximize HRA exemption if in old regime, 3) Opt for new regime if you have fewer deductions, 4) Choose flexible benefits like meal coupons, LTA.
When should I choose old tax regime?
Choose old regime if your total deductions (80C, 80D, HRA, home loan) exceed ₹3-4 lakh. Otherwise, new regime with ₹75K standard deduction and lower rates is usually better.
Is gratuity part of my salary?
Gratuity is part of CTC but you receive it only after completing 5 years of service. If you leave before 5 years, you forfeit gratuity (it reverts to employer, not paid to you).