Shortlists4 min read · updated 16 October 2026
CTC vs in-hand salary: what actually reaches your bank account
An offer letter says “₹12 lakh CTC”. Your first salary is nowhere near ₹1 lakh. Here is where the difference goes, what to ask HR, and three worked examples.
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What CTC means
CTC stands for cost to company: everything the employer spends on you in a year. It includes money you receive every month, money you may receive later or only if targets are met, and money that is spent on you but never lands in your account.
The parts inside a CTC
- Fixed pay (gross salary): basic pay, house rent allowance and other allowances. This is the monthly salary before deductions.
- Variable pay: a bonus or incentive paid only if the company, team or you hit targets. Not guaranteed.
- Employer PF: the company’s contribution to your Provident Fund, usually 12% of basic. It is yours, but you only get it when you withdraw the PF.
- Gratuity: a retirement-type benefit worth about 4.81% of basic. You receive it after five years of service in most cases.
- Insurance and benefits: health cover, meal cards, wellness and similar. Counted in CTC, not paid to you in cash.
- Joining or retention bonus: paid once, sometimes with a clause to return it if you leave early.
- Stock or ESOP value: counted at the company’s valuation. It is not cash and may be worth less, or nothing.
What comes out of your salary every month
- Your own PF: 12% of basic, deducted from your gross. It goes to your PF account.
- Professional tax: a state tax, up to ₹2,500 a year in the states that charge it.
- Income tax (TDS): deducted every month based on your expected yearly income. Under the new regime, income up to ₹12 lakh of taxable income is effectively tax-free because of the section 87A rebate, which is why many freshers pay no income tax at all.
Three worked examples
These use the assumptions of our CTC to in-hand calculator: basic is 40% of fixed pay, employer PF and gratuity are inside CTC, professional tax is ₹2,500 a year, new tax regime. Your own breakup will differ, so treat the numbers as a guide.
| Offer | CTC ÷ 12 | Typical monthly in-hand | Notes |
|---|---|---|---|
| ₹6 lakh CTC, all fixed | ₹50,000 | about ₹44,400 | No income tax at this level; PF and gratuity are the main gap. |
| ₹12 lakh CTC, 10% variable (80% paid) | ₹1,00,000 | about ₹80,100 | Plus about ₹96,000 variable pay once a year, if it is paid. |
| ₹18 lakh CTC, 10% variable (80% paid) | ₹1,50,000 | about ₹1,11,900 | Plus about ₹1.2 lakh once a year after tax; income tax starts to bite. |
In each case the monthly in-hand is roughly 75% to 89% of the headline CTC across a year. The bigger the variable, stock and benefits in CTC, the bigger the gap between the headline and your bank balance.
Ten questions to ask HR before you accept
- What is the fixed monthly gross salary?
- How much of the CTC is variable, and what did people in this role actually receive last year?
- Is the joining bonus inside CTC, and is there a clawback if I leave?
- Is employer PF inside CTC? Is it capped at the ₹15,000 wage ceiling or on full basic?
- What is basic pay as a share of fixed pay?
- What insurance and benefits are counted, and what is their cost?
- Is there stock or ESOP, and how is it valued and vested?
- Is there a bond or notice period that costs money to break?
- When is the first salary credited?
- Can I have the salary breakup in writing?
Comparing two offers properly
Don’t compare CTC with CTC. Compare monthly in-hand and expected yearly cash (monthly × 12 plus the variable you can realistically expect). Then add what is not cash but real: a good manager, learning, a brand, a city with lower rent. A slightly lower salary at a place that teaches you more can beat a higher figure with a heavy bond.
Common questions
Why is my in-hand salary lower than CTC divided by 12?
Because CTC includes employer PF, gratuity, insurance, any joining bonus, stock and variable pay, none of which arrive as monthly salary. Your own PF, professional tax and income tax are then deducted from the rest.
Is in-hand the same as take-home or net salary?
Yes. They all mean the amount credited to your bank account after deductions.
Do internships have CTC?
Usually a stipend instead, paid monthly. There is normally no employer PF or gratuity. Check whether tax is deducted; low stipends are often below the taxable limit.
Which tax regime is better for freshers?
For most freshers the new regime is simpler and often cheaper, as there are few deductions to claim. If you expect large deductions (home loan interest, for example), compare both for your own case. This is general information, not tax advice.
Keep reading
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What a PPO (pre-placement offer) is, how it differs from an internship, how interns convert to full-time offers, and what to do if you don’t get one.
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“Shortlisted” means you passed the first screen and are still in the running. What it does and doesn’t mean, and how to prepare for the next round.
Written by the Shortlists team for students in India. General information, not professional advice. Last updated 16 October 2026.