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CTC, gross and take-home: where part of your salary goes

6 min readApplies to: Tax Year 2026–27 (Income-tax Act, 2025), new tax regime
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Short answer: CTC (cost to company) is everything your employer spends on you in a year. Some of that money never shows up in your monthly salary. Two examples are the employer’s PF contribution (PF, or Provident Fund, is a long-term savings account) and gratuity (a lump sum paid when you leave after enough years of work). Gross salary is what you are paid before anything is cut. Take-home is what actually reaches your bank account after your own PF, professional tax and income tax (TDS: tax your employer cuts from your salary and pays to the government). A ₹6 lakh CTC doesn’t mean ₹50,000 a month in hand. In our example it’s closer to ₹42,900.

The situation

Priya, 23, has her first job offer in Pune: “CTC ₹6,00,000 per annum” (per year). She divides by 12 and plans her rent on ₹50,000 a month. Her first salary credit is ₹42,886. What happened?

Three layers of your salary

CTC
 − Employer's PF contribution
 − Gratuity provision (and other employer-side costs)
 = Gross salary
 − Your PF contribution
 − Professional tax (in some states)
 − Income tax deducted at source (TDS)
 − Other deductions (e.g. loan recovery, canteen)
 = Take-home pay

The “gratuity provision” is the amount your employer puts aside each month towards your future gratuity.

Priya’s fictional payslip

Assumptions: private-sector job in Maharashtra; basic pay is 48% of monthly CTC; employer and employee PF are 12% of basic; gratuity provision shown inside CTC; no bonus or variable pay; new tax regime; Tax Year 2026–27. All numbers are examples only, not a real offer.

Monthly ₹
Basic 24,000
House rent allowance (HRA) 9,600
Special allowance 12,366
Gross salary 45,966
+ Employer PF (12% of basic) 2,880
+ Gratuity provision 1,154
CTC (monthly) 50,000

Now take the deductions away from gross:

Monthly ₹
Gross salary 45,966
− Employee PF (12% of basic) 2,880
− Professional tax (Maharashtra) 200 (₹300 in February)
− TDS (income tax) 0
Take-home 42,886

Over the year Priya takes home ₹5,14,532, about 86% of her CTC.

Where did the ₹85,468 go?

Per year
Employer PF (part of CTC, goes to her PF account) ₹34,560
Her own PF (cut from gross, also goes to her PF account) ₹34,560
Gratuity provision (paid only when she leaves after the required years of service) ₹13,848
Professional tax ₹2,500
Total ₹85,468

Most of this isn’t “lost”. ₹69,120 goes into her PF, savings for later that earn interest. She can’t spend it this month, though. So she should build her budget on ₹42,886, not ₹50,000.

Why is her income tax zero?

Under the new tax regime for Tax Year 2026–27:

  • Gross salary for the year: ₹5,51,592
  • Minus the standard deduction for salaried people (₹75,000), a fixed amount you subtract before tax is worked out: taxable income ₹4,76,592
  • Tax at slab rates (rates that go up in steps as income rises): 5% on the part above ₹4,00,000 = ₹3,830
  • Rebate (a discount on the tax itself): if you are a resident and your taxable income is up to ₹12 lakh, the rebate cancels the tax. Tax = ₹0.

Earn more, and you’d see TDS taken from your salary every month. Your employer works out your likely tax for the whole year and divides it across your monthly salaries.

Tax rules depend on the tax year and on the tax regime (set of tax rules) you choose. From 1 April 2026, India’s new Income-tax Act, 2025 uses the term “Tax Year” (2026–27 is the first). Don’t reuse old tax tables without checking.

Things that make take-home lower than expected

  • Variable pay or bonus included in CTC. It may come once a year, or only in part. Don’t count it as monthly income.
  • Insurance premiums or meal cards counted inside CTC.
  • PF on a higher base. From 17 September 2026, the PF wage ceiling (the pay level up to which PF is compulsory) is ₹25,000 a month (previously ₹15,000). If your basic pay plus DA is up to ₹25,000, PF is required on your full basic. Compared with older offers, that can lower your take-home.
  • New Labour Codes (in effect since 21 November 2025): if allowances, the extra parts of pay like HRA, are more than 50% of your pay, part of them is added back to “wages” for PF and gratuity. Some money can move from take-home to PF this way.

Questions to ask HR before you accept an offer

  1. What’s my fixed monthly gross, and what’s my expected monthly take-home?
  2. How much of the CTC is variable, and when and how is it paid?
  3. Apart from salary, what does the CTC include: PF, gratuity, insurance, meal cards?
  4. Is PF calculated on my full basic pay?
  5. Which tax regime will TDS assume, and how do I tell you my choice?

What to check today

  1. Open your latest payslip and find three numbers: gross, total deductions, net pay.
  2. Check that the net pay matches what reached your bank.
  3. Build your budget on net pay, and keep bonuses separate.

Try it with your own numbers

→ Salary calculator: start with the take-home from your payslip (quick mode), or break down a CTC offer (detailed mode). We don’t ask for your PAN or Aadhaar.

Sources and review

Applies to: Tax Year 2026–27.

Try it with your numbers
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Educational information, not financial advice. Found an error? Tell us → · Corrections log

Frequently asked questions

Why is my in-hand salary less than CTC divided by 12?

Your CTC includes money that never reaches your monthly salary. Two examples are the employer's PF contribution and the gratuity provision. Gratuity is a lump sum you get after enough years of work. Then your own PF, professional tax and TDS come out of gross pay. In our example, a ₹6 lakh CTC gives about ₹42,900 a month in hand, not ₹50,000.

What is the difference between gross salary and net salary?

Gross salary is your pay before anything is cut. Net salary, or take-home, is what actually reaches your bank account. The gap is your own PF, professional tax in some states, and TDS (income tax your employer cuts and pays to the government). Build your budget on net pay and keep bonuses separate. Try the Salary calculator with your own payslip.

Do I pay income tax on a ₹6 lakh CTC in the new regime?

Not in our example. Under the new regime for Tax Year 2026–27, salaried people first subtract a standard deduction of ₹75,000. Then, if you are a resident with taxable income up to ₹12 lakh, a rebate cancels the tax. A rebate is a discount on the tax itself. Priya's taxable income is ₹4,76,592, so her tax is ₹0.

Is the PF cut from my salary wasted money?

No. Your own PF and your employer's PF both go into your PF account (Provident Fund, a long-term savings account), and the money earns interest. EPFO declared 8.25% for FY 2025–26. In our example, ₹69,120 a year goes into PF. You can't spend it this month, though, so plan your budget on take-home pay.

Will the new PF wage ceiling of ₹25,000 change my take-home?

It may. From 17 September 2026, the PF wage ceiling (the pay level up to which PF is compulsory) is ₹25,000 a month, up from ₹15,000. If your basic pay plus DA (dearness allowance) is up to ₹25,000, PF is required on your full basic. Compared with older offers, that can lower your take-home.

What should I ask HR before I accept a job offer?

Ask for your fixed monthly gross and your expected monthly take-home. Find out how much of the CTC is variable pay, and when it is paid. Check what else the CTC includes, such as PF, gratuity, insurance or meal cards. Ask whether PF is worked out on your full basic pay, and which tax regime TDS will assume.