From CTC to in-hand — how the maths works
The number on your offer letter (CTC, or “cost to company”) is rarely what you take home. CTC is the employer’s total cost of employing you for a year — which includes things like Provident Fund and gratuity that never appear in your bank account each month, and a chunk that the government taxes before you see it. This calculator walks the full chain: split CTC into its standard components, deduct what doesn’t reach your bank, compute income tax under the regime of your choice, and tell you the actual monthly cash you’ll receive.
The standard CTC structure
Most Indian companies break CTC into a stable set of components:
- Basic salary — typically 40–50% of CTC. Used as the base for HRA, PF, and gratuity.
- House Rent Allowance (HRA) — usually 50% of basic for metro cities (Mumbai, Delhi, Kolkata, Chennai), 40% for non-metros. Partially exempt under Section 10(13A) when you actually pay rent.
- Special allowance — the residual after basic, HRA, employer PF, and gratuity. Fully taxable.
- Employer Provident Fund (EPF) — 12% of basic, capped at 12% of ₹15,000 = ₹1,800/month if your company applies the wage cap (most do).
- Gratuity accrual — 4.81% of basic per month, payable on exit after 5+ years of continuous service. Most companies show this as a CTC line item even though you’ll only see it on departure.
- Bonus / variable — performance pay, often quoted as a target percentage of CTC. Fully taxable.
What the calculator does
Given your CTC and the standard split assumptions:
- Computes basic, HRA, employer PF, and gratuity.
- Computes special allowance = CTC − fixed components − bonus.
- Adds bonus to gross taxable salary.
- Computes HRA exemption (old regime only) = least of (HRA, 50%/40% basic, rent − 10% basic).
- Delegates tax computation to our income-tax engine, applying standard deduction (₹50K old / ₹75K new) and your chosen Chapter VI-A deductions.
- Subtracts employee PF, professional tax, and average monthly TDS from cash gross to give monthly in-hand.
HRA exemption — the rent maths
Under Section 10(13A), the exempt portion of HRA is the LEAST of:
- Actual HRA received from employer
- 50% of basic (metro) or 40% of basic (non-metro)
- Rent paid minus 10% of basic
For ₹15L CTC at 40% basic (₹6L) in a metro, with ₹25K monthly rent:
- Actual HRA = 50% × 6L = ₹3 lakh
- 50% basic = ₹3 lakh
- Rent − 10% basic = (25K × 12) − 60K = 3L − 60K = ₹2.4 lakh
- Exemption = least of three = ₹2.4 lakh
That ₹2.4 lakh is removed from taxable income (only on the old regime — the new regime forfeits HRA exemption entirely). At a 30% marginal rate, that’s a ₹72,000/year tax saving from renting in a metro.
Provident Fund — the wage cap
EPFO mandates 12% employee + 12% employer of basic. The 12% employer contribution splits as 8.33% to EPS (Employees Pension Scheme, capped at ₹15K wage) + 3.67% to EPF. Most companies cap PF contribution at 12% of ₹15,000 basic = ₹1,800/month, even when actual basic is much higher. This is legally permitted (Supreme Court 2019 ruling). Companies that DON’T cap PF give a higher accumulated corpus but lower in-hand.
The calculator’s “Apply PF wage cap” toggle lets you compare both scenarios. Toggle off → full 12% of basic flows to PF (savings) and reduces in-hand. Toggle on → only ₹1,800/month goes to PF, freeing up cash.
Gratuity accrual
Gratuity is a statutory benefit under the Payment of Gratuity Act 1972. Accrues at 15 days of last drawn basic per year of service— expressed as a monthly accrual rate of 15/26/12 = 4.81% of basic. Payable on exit after 5+ years of continuous service. Up to ₹20 lakh of gratuity received at exit is exempt from income tax.
Most companies show gratuity in the CTC offer letter even though you only see it on departure. Toggle “Gratuity included in CTC” off if your offer letter explicitly excludes it (some startups don’t, despite the legal obligation).
Professional tax
State-level levy on salaried income, deducted monthly:
- Maharashtra, Karnataka, Tamil Nadu, West Bengal, Andhra Pradesh, Telangana, Gujarat, etc. — ₹2,400–₹3,000/year typical for income above ₹10K/month.
- Delhi, Haryana, UP, Rajasthan, Punjab — no professional tax.
The calculator defaults to ₹2,500/year. Adjust to your state’s slab if needed.
Worked example — ₹15L CTC, 40% basic, metro, new regime
- CTC = ₹15,00,000
- Basic = ₹6,00,000 (40%)
- HRA = ₹3,00,000 (50% of basic, metro)
- Employer PF (capped) = ₹21,600/year
- Gratuity accrual = ₹28,860/year (4.81% × 6L)
- Special allowance = 15L − 6L − 3L − 21.6K − 28.86K = ₹5,49,540
- Gross taxable salary = 6L + 3L + 5.49L = ₹14,49,540
- Standard deduction (new regime) = ₹75,000
- Taxable income = ₹13,74,540
- Tax (new regime FY 2026-27) = ~₹1,17,000 + cess
- Employee PF = ₹21,600/year
- Professional tax = ₹2,500/year
- In-hand annual = 14.49L − 21.6K − 2.5K − 1.21L ≈ ₹13.06 lakh
- Monthly in-hand = ₹1.09 lakh
Frequently asked questions
- Why is my in-hand much lower than CTC?
- Three reasons: PF (employer + employee, doesn’t reach your bank), gratuity (only at exit), and income tax. For a typical ₹15L CTC, your bank account sees about ₹13L per year = ₹1.08L/month, depending on regime.
- Old or new regime — which gives more in-hand?
- Depends on your deductions. If you have significant (HRA + 80C + home loan interest + 80D), old regime usually wins. If you have minimal deductions, new regime wins because of its wider slabs and higher standard deduction (₹75K vs ₹50K). The calculator lets you toggle between them and compare.
- Why is HRA exemption shown only on old regime?
- New regime explicitly removes HRA, LTA, Section 24(b), and most Chapter VI-A deductions in exchange for lower slab rates. This is the central trade-off; we don’t apply HRA exemption when you select new regime.
- How accurate is this calculator?
- All maths uses high-precision decimal arithmetic and delegates income-tax computation to our income-tax engine, which is cross-checked against published Income Tax India examples. CTC reconciliation invariant (components must sum to CTC within ₹1) is asserted in 200+ property-based tests.
Sources
- EPFO — Employees Provident Fund & Miscellaneous Provisions Act 1952
- Section 10(13A) of the Income Tax Act 1961 — HRA exemption
- Payment of Gratuity Act 1972 — gratuity accrual rate
- State Professional Tax Acts (Maharashtra, Karnataka, etc.)
- Finance Act 2024 — standard deduction increase
Disclaimer. Actual take-home depends on the exact salary structure your employer chooses, mid-year revisions, joining bonuses, leave encashment, ESOP exercises, and any additional flexible benefits. This calculator gives a steady-state monthly average; consult your HR / payroll team for the exact monthly breakdown.