CTC to In-Hand Salary: How to Convert Your CTC to Take-Home Pay (FY 2025-26)
Your offer letter shows an impressive CTC, but the amount that actually lands in your bank account each month is noticeably smaller. That gap between CTC (Cost to Company) and your in-hand (take-home) salary confuses almost everyone — and after the new Labour Codes took effect in November 2025, the maths shifted again. This guide explains exactly how to go from CTC to in-hand salary for FY 2025-26 (AY 2026-27), with a clear method, a CTC → gross → net table, and a fully worked example you can follow with your own numbers.
Quick note: The Union Budget 2026 made no changes to income-tax slabs or the ₹60,000 rebate, so everything below also applies to FY 2026-27.
Key Takeaways
- CTC is not your salary. It's the employer's total annual cost — including parts you never receive as cash (employer EPF, gratuity, insurance premiums).
- In-hand salary = Gross salary − employee EPF − professional tax − income tax (TDS).
- The new tax regime is the default and delivers zero tax up to ₹12.75 lakh for salaried people, so at moderate CTCs the TDS bite is often much smaller than feared.
- Two people with the same CTC can take home different amounts depending on basic-pay percentage, tax regime, city, and employer PF policy.
- The new Labour Codes (from 21 Nov 2025) require basic + DA to be at least 50% of CTC, which can raise EPF/gratuity and slightly reduce take-home.
- The fastest route to your exact figure is an in-hand salary calculator using your real CTC breakup.
The Three Numbers You Must Not Confuse
Get these straight before you calculate anything (for a detailed walkthrough, see our guide on how to calculate in-hand salary from CTC):
| Term | What it means | Do you receive it as cash? |
|---|---|---|
| CTC (Cost to Company) | Total annual amount the employer spends on you | No — includes non-cash items |
| Gross salary | CTC minus employer retiral/benefit contributions | Partly — before deductions |
| Net / in-hand salary | What actually reaches your bank account | Yes — this is your take-home |
The difference between CTC and gross is mostly the employer's EPF contribution and gratuity. The difference between gross and net is your own deductions — employee EPF, professional tax and income tax (TDS).
The CTC to In-Hand Salary Formula
Converting CTC to take-home is a two-step subtraction:
- Gross salary = CTC − employer EPF − gratuity − other employer-only costs (group insurance premium, etc.).
- In-hand salary = Gross salary − employee EPF − professional tax − income tax (TDS).
Every rupee that leaves your CTC before it reaches you falls into one of these buckets. Understanding each one is the whole game.
CTC to In-Hand: Component-by-Component Breakdown
For a deeper look at how each element fits together, see our salary structure in India guide.
| Component | Where it sits | Typical value (FY 2025-26) |
|---|---|---|
| Basic salary | In gross | ≥50% of CTC under the new Labour Codes |
| HRA | In gross | Commonly 40% (non-metro) or 50% (metro) of basic |
| Special allowance | In gross | Balancing figure |
| Employer EPF | CTC only (not gross) | 12% of basic (₹1,800/mo at the ₹15,000 wage ceiling) |
| Gratuity | CTC only | ~4.81% of basic (received only after 5 years) |
| Employee EPF | Deducted from gross | 12% of basic (₹1,800/mo at the ceiling) |
| Professional tax | Deducted from gross | State-levied, max ₹2,500/year |
| Income tax (TDS) | Deducted from gross | Depends on regime, income & deductions |
| Standard deduction | Reduces taxable income | ₹75,000 (new) / ₹50,000 (old) |
Worked Example: ₹12,00,000 CTC → In-Hand Salary (New Regime)
Assume a salaried employee, ₹12,00,000 CTC, new-regime default, basic set at 50% of CTC per the Labour Codes, and EPF calculated on the ₹15,000 statutory wage ceiling.
Step 1 — CTC to gross (annual)
| Item | Amount (₹/year) |
|---|---|
| CTC | 12,00,000 |
| Less: Employer EPF (₹1,800 × 12) | −21,600 |
| Less: Gratuity (~4.81% of ₹6,00,000 basic) | −28,860 |
| Gross salary | 11,49,540 |
Step 2 — Gross to net (annual)
| Item | Amount (₹/year) |
|---|---|
| Gross salary | 11,49,540 |
| Less: Employee EPF (₹1,800 × 12) | −21,600 |
| Less: Professional tax (max) | −2,500 |
| Less: Income tax (TDS) — see below | −0 |
| Net (in-hand) salary — annual | 11,25,440 |
| Net (in-hand) salary — monthly (approx.) | ≈ ₹93,787 |
Step 3 — Why the income tax is ₹0
- Gross salary ₹11,49,540 − ₹75,000 standard deduction = ₹10,74,540 taxable.
- Tax on ₹10,74,540 under the new regime is well within the ₹12 lakh rebate ceiling.
- The §87A rebate (up to ₹60,000) wipes the liability to ₹0.
So on a ₹12 lakh CTC, a salaried employee on the new regime pays no income tax — the entire deduction from gross to net comes from EPF and professional tax. For more on how the tax itself is computed, see our CTC tax calculation guide. The old assumption of ₹60,000 annual tax at this level is simply wrong for FY 2025-26.
Why Two People with the Same CTC Take Home Different Amounts
- Basic-pay percentage: A higher basic means higher EPF (12% of basic), so more goes to retirement and less to cash. The Labour Codes' 50% floor pushes basic — and therefore EPF — up for many employees.
- Tax regime: New (default) vs old changes TDS entirely.
- City: Professional tax and HRA benefits vary by state/metro status.
- Employer PF policy: Some contribute on actual basic (higher deduction), others cap at the ₹15,000 ceiling.
How the New Labour Codes Change Your Take-Home
The four consolidated labour codes took effect on 21 November 2025. The key change for your payslip: wages (basic + DA) must be at least 50% of total CTC. Because EPF and gratuity are calculated on basic, a higher basic means larger EPF and gratuity contributions — boosting long-term retirement savings but potentially reducing monthly take-home if your CTC stays the same. It's not a pay cut; more of your money is simply redirected into forced savings.
Common Mistakes to Avoid
- Treating CTC as salary. CTC includes employer EPF and gratuity you never see monthly. Our understanding CTC guide breaks this down in detail.
- Ignoring the tax regime. Take-home is meaningless without saying which regime applies — the new regime is the default.
- Forgetting the standard deduction (₹75,000 new / ₹50,000 old) when estimating tax.
- Over-estimating TDS. At ≤₹12.75 lakh salary, new-regime tax is often ₹0 — don't subtract phantom tax.
- Assuming gratuity is monthly cash. It's paid only after 5 years of service.
- Using a flat "₹200" for professional tax without noting it's state-specific and capped at ₹2,500/year.
Expert Tips to Maximise In-Hand Salary
- Pick the right regime. For salary ≤₹12.75 lakh with modest deductions, the new regime usually maximises take-home — compare both with a regime tax calculator or the tax comparison chart.
- Claim HRA correctly (old regime) with valid rent receipts to cut taxable income.
- Use employer NPS (80CCD(2)) — deductible in both regimes and it boosts retirement savings tax-efficiently.
- Understand the trade-off: a higher basic lowers cash today but raises EPF and gratuity — long-term wealth, not lost money.
- Model before you accept an offer. Run the CTC through a CTC calculator to see gross and net before signing, or work backwards from a target take-home with a reverse tax calculator.
Frequently Asked Questions
What is the difference between CTC and in-hand salary?
CTC is the employer's total annual cost, including non-cash items like employer EPF and gratuity. In-hand (take-home) salary is what reaches your bank account after employee EPF, professional tax and income tax are deducted from your gross salary.
How do I calculate in-hand salary from CTC?
First subtract employer contributions (employer EPF, gratuity) from CTC to get gross salary. Then subtract employee EPF, professional tax and income tax (TDS) from gross to get your net in-hand salary.
How much in-hand salary will I get for a ₹12 lakh CTC in FY 2025-26?
Roughly ₹93,000–95,000 per month for a salaried employee on the new regime, because tax is ₹0 up to ₹12.75 lakh and the main deductions are EPF and professional tax. Your exact figure depends on your basic-pay percentage and employer PF policy — check it with an in-hand salary calculator.
Why is my take-home salary so much less than my CTC?
Because CTC includes employer EPF and gratuity (you never see these monthly), and your gross is further reduced by employee EPF, professional tax and TDS. The new Labour Codes' 50%-basic rule can widen this gap by increasing EPF.
How do the new Labour Codes affect my in-hand salary?
From 21 November 2025, basic + DA must be at least 50% of CTC. This raises EPF and gratuity contributions, which can reduce monthly take-home while increasing your long-term retirement savings.
Is professional tax the same in every state?
No. Professional tax is levied by individual states and is capped at ₹2,500 per year. Some states (e.g. Maharashtra, Karnataka) charge it; a few do not levy it at all.
Does everyone pay income tax on their salary?
No. Under the default new regime, salaried individuals pay zero income tax up to ₹12.75 lakh thanks to the ₹75,000 standard deduction and the ₹60,000 §87A rebate.
Summary
Going from CTC to in-hand salary is a two-step subtraction: strip out employer contributions to reach gross, then strip out your own EPF, professional tax and income tax to reach net. For FY 2025-26 the biggest surprises are good ones — the new regime means zero tax up to ₹12.75 lakh for most salaried people, so TDS is often smaller than expected. The new Labour Codes' 50%-basic rule may nudge more of your CTC into EPF and gratuity, trading a little monthly cash for larger long-term savings. Don't estimate by hand for anything important.
Want your exact number? Use our free in-hand salary calculator or CTC calculator to convert your CTC to take-home pay in seconds.
Figures are for FY 2025-26 (AY 2026-27) and carried forward for FY 2026-27. This guide is for general information only — verify your specific numbers with a tax professional, EPFO or your payroll department.