If you’re starting a new job or negotiating your salary, one of the most confusing things you’ll see is the difference between CTC and In-hand Salary. Many candidates are surprised when their take-home salary is much lower than the CTC mentioned in the offer letter. This blog explains CTC vs In-hand Salary, salary components, deductions, calculations, and real examples so you can clearly understand what you will actually receive every month.
CTC stands for Cost to Company. It is the total annual amount that a company spends on an employee. It includes not only the salary you receive every month but also additional benefits, allowances, and employer contributions. CTC is NOT your take-home salary because it also includes components you don’t receive in hand.
CTC includes three major parts:
Basic salary
HRA
Special allowance
Conveyance/meal allowance
Bonuses (monthly/annual)
Health insurance premium
Company-provided meals, transport, coupons
Office laptop or workstation cost
Employer PF contribution
Gratuity
Superannuation fund
Let’s assume your Annual CTC = ₹6,19,938.
Here’s how it could be broken down:
| Component | Annual Amount (₹) |
|---|---|
| Basic Salary | 3,00,000 |
| HRA | 96,000 |
| Special Allowance | 1,44,000 |
| Employer PF Contribution | 28,800 |
| Gratuity | 11,538 |
| Medical Insurance | 9,600 |
| Annual Bonus | 30,000 |
| Total CTC | ₹6,19,938 |
Notice that Employer PF, Gratuity, and Insurance are included in CTC but not received as cash.
CTC = Direct Benefits + Indirect Benefits + Employer Contributions
Or in simple words:
CTC = Salary you receive + company benefits + employer PF + insurance + gratuity + bonus
In-hand salary, also called take-home salary or net salary, is the actual amount credited to your bank account every month after all deductions. It is the money you can spend, save, or use daily.
In-Hand Salary = Gross Salary – Deductions
Where deductions include:
Employee PF contribution
Professional Tax (PT)
Income Tax (TDS)
Health/medical insurance
Other company-specific deductions
You receive:
Basic salary
HRA
Special allowance
Conveyance/meal allowance
Any fixed monthly components
You do NOT receive:
Employer PF
Gratuity
Insurance premium paid by company
Bonuses (unless paid monthly)
Any indirect benefits
| Component | Monthly (₹) |
|---|---|
| Basic Salary | 32,000 |
| HRA | 11,000 |
| Special Allowance | 8,661 |
| Gross Salary | ₹51,661 |
| Deduction | Amount (₹) |
|---|---|
| Employee PF (12% of Basic) | 2,400 |
| Professional Tax | 200 |
| Income Tax (TDS) | 1,000 (approx.) |
| Insurance Deduction | 300 |
| Total Deductions | ₹3,900 |
In-Hand Salary = 51,661 – 3,900 = ₹47,761 per month
This is the amount that will actually be credited to your bank account.
Add all monthly earnings:
Basic + HRA + Special Allowance + Other Allowances
PF = 12% of Basic
Professional Tax (0–200 depending on state)
Income Tax (based on tax slab)
Insurance premiums
Any other deductions
In-Hand = Gross – Total Deductions
| Component | CTC (Cost to Company) | Gross Salary | Net Salary / In-Hand Salary |
|---|---|---|---|
| Meaning | Total cost a company spends on you in a year | Salary before deductions | Final salary received after all deductions |
| Includes | Basic + HRA + Allowances + Bonus + Employer PF + Gratuity + Insurance | Basic + HRA + Allowances + Bonus (if monthly) | Basic + HRA + Allowances minus PF, Tax, Insurance |
| Paid to Employee? | Not fully (includes non-cash benefits) | Paid before deductions | Actual take-home amount |
| Employer PF Included? | Included | Not included | Not included |
| Gratuity Included? | Included | Not included | Not included |
| Insurance Included? | Included | Not included | Not included |
| Variable Pay Included? | Included | Included (if monthly) | Partially received depending on payout |
| Typical Value | Highest | Medium | Lowest |
| Used For | Offer letter & salary package | Tax and deduction calculations | Monthly take-home salary |
CTC includes many components you never receive as cash, which is why your in-hand salary feels much smaller.
Companies add their Provident Fund contribution into your CTC, but this amount is deposited into your PF account — not paid to you monthly.
A long-term benefit paid only after completing 5 years of service, yet it is included in your CTC from the beginning.
Company-paid health, medical, or accidental insurance is counted in CTC, even though you don’t get it as part of your monthly salary.
This is included in CTC but not credited every month.
It may be paid as:
Quarterly bonus
Annual bonus
Performance-linked incentives
Some allowances included in CTC—like meal cards, travel allowance, or phone allowance—are conditional or reimbursable, meaning you may not receive them fully in cash.
Don’t just look at the CTC. Request a detailed breakup including:
Basic salary
HRA
Allowances
Employer PF contribution
Insurance
Variable pay
This is your real, usable income—not the CTC mentioned in the offer letter.
If variable pay forms a large portion (20–40%), your fixed monthly income may be lower than expected.
A higher basic salary increases PF deduction, which reduces your in-hand salary.
Gratuity adds to CTC but isn’t paid monthly.
Your take-home salary depends on:
The tax regime you choose
Investments and exemptions
HRA benefits
You can negotiate for:
Higher basic salary
Lower variable pay
Joining bonus
Relocation allowance
Higher take-home instead of benefits you don’t need
| Myths | Reality |
|---|---|
| “CTC is the same as my salary.” | CTC includes many components you never receive in cash. Your in-hand salary is always lower. |
| “Higher CTC means higher take-home.” | A high CTC may include PF, gratuity, insurance, and reimbursements — not all increase your take-home salary. |
| “Variable pay is guaranteed every month.” | Variable pay depends on company policy and performance. It is often paid quarterly or yearly, not monthly. |
| “Employer PF contribution increases my in-hand salary.” | Employer PF increases CTC but does not increase your monthly take-home salary. |
| “All allowances included in CTC are paid in cash.” | Some allowances are conditional, reimbursable, or non-cash (like meal cards or travel vouchers). |
| “Insurance added to CTC means I earn more.” | Insurance is a cost borne by the company; it does not increase your monthly salary. |
| “I will receive the entire bonus included in CTC.” | Bonuses may be variable, performance-based, or annual, so they don’t add to monthly salary. |
Ans: No. CTC includes PF, gratuity, insurance, and other employer costs. You only receive the in-hand salary after all deductions.
Ans: Because CTC includes many non-cash components like employer PF, insurance premiums, and gratuity, which do not come to you as monthly cash.
Ans: Typically 50%–70%, depending on tax, PF contribution, allowances, and variable pay.
Ans: Deductions include PF, professional tax, income tax (TDS), insurance, and any other company-specific deductions.
Ans: Not always. If the CTC has a high PF, gratuity, or variable pay component, the in-hand salary may still be low.
Gross salary → Before deductions
Net salary (in-hand) → After PF, tax, and insurance deductions
Ans: Not monthly. Most bonuses are paid quarterly or annually and are part of CTC but not part of monthly take-home.
Ans: Check the full salary breakup, percentage of variable pay, PF impact, tax deductions, and your monthly in-hand salary.
Understanding the difference between CTC and in-hand salary is essential for every job seeker. While CTC represents the total cost a company spends on you, your in-hand salary is the actual amount you receive each month after deductions like PF, tax, and insurance. This is why your take-home pay is always lower than the CTC mentioned in offer letters.
By learning how CTC, gross salary, and net salary work, you can evaluate job offers better, avoid misunderstandings, and negotiate smarter. Knowing your real monthly income helps you make informed career and financial decisions with confidence.
Be the first to share your thoughts!