CTC vs Gross vs Take-Home Salary: What You Actually Get

CTC (cost to company) is the total the employer spends on you in a year. Gross salary is CTC minus the employer's own costs such as its PF contribution, gratuity and insurance. Take-home (net) salary is gross minus your PF, professional tax and income tax. On a ₹12 lakh CTC, monthly take-home in tax year 2026-27 can be about ₹84,500, not ₹1 lakh.

The three numbers in one line

CTC − employer-side costs = Gross salary − employee deductions = Take-home salary

Note on forms: from tax year 2026-27, the salary TDS certificate is Form 130 under the Income-tax Rules, 2026, replacing the familiar Form 16. Salary TDS is now deducted under Section 392 of the Income-tax Act, 2025 (old Section 192).

What sits inside CTC

Basic pay. The base on which PF and gratuity are calculated. It is fully taxable.

HRA (house rent allowance). Partly exempt under the old regime if you pay rent (old Section 10(13A) rules). Fully taxable under the new regime.

Special or flexible allowance. The balancing figure that makes the numbers add up. Fully taxable. Some employers split part of it into reimbursements such as phone or fuel.

Employer PF. The employer contributes 12% of PF wages (basic plus DA). Of this, 8.33% goes to the Employees' Pension Scheme (EPS) on wages up to the EPS ceiling and the rest to your EPF account. It is part of CTC but never reaches your bank account each month.

Gratuity. Many employers show a provision of about 4.81% of basic (15 days' wages for each year of service, spread monthly). You receive it only on leaving after qualifying service, usually five years.

Insurance and other benefits. Group health or term insurance premiums, meal cards, and sometimes employer NPS.

Variable pay. Target bonus or performance pay. It is often included in CTC but paid once or twice a year, and only if targets are met.

Deductions between gross and take-home

• Employee PF: 12% of PF wages. Some employers deduct it only on the statutory wage ceiling; others deduct on full basic.
• Professional tax: A state levy of up to ₹2,500 a year. It varies by state and some states do not levy it.
• Income tax (TDS): Your employer estimates your full-year tax and deducts it evenly each month. You must declare your regime choice; if you do not, the new regime applies by default.
• Other: Voluntary PF (VPF), loan recoveries, canteen or transport charges.

Two rule changes to know (as of October 2026)

Labour codes: wages at least 50% of pay. The four labour codes took effect on 21 November 2025. Under the Code on Wages, "wages" (basic + DA + retaining allowance) must generally be at least 50% of total remuneration; excluded allowances above half are added back. Employers that kept basic at 30% to 40% of pay are restructuring. Result: higher PF and gratuity, slightly lower monthly take-home, usually with CTC unchanged.

EPF wage ceiling to ₹25,000. The Union Cabinet approved raising the mandatory EPF wage ceiling from ₹15,000 to ₹25,000 a month in September 2026, according to news reports. Employers that compute PF on the ceiling will deduct more. Check your payslip and the EPFO notification for the exact effective date.

Worked example 1: ₹12 lakh CTC (illustrative)

Assumptions: basic is 50% of CTC, HRA is 40% of basic, PF is 12% on full basic, gratuity is 4.81% of basic, group health premium is ₹10,000, new tax regime, professional tax ₹2,500.

Now from gross to take-home:

• Employee PF: ₹72,000
• Professional tax: ₹2,500
• Taxable income (new regime): ₹10,89,140 − ₹75,000 standard deduction = ₹10,14,140
• Tax: slab tax is ₹41,414 (₹20,000 on ₹4–8 lakh plus 10% of ₹2,14,140), but taxable income is under ₹12 lakh, so the rebate under Section 156 (old Section 87A) brings it to nil

Take-home = ₹10,89,140 − ₹72,000 − ₹2,500 = ₹10,14,640 a year, or about ₹84,553 a month. That is about 85% of CTC.

Worked example 2: ₹20 lakh CTC (illustrative)

Same structure: basic ₹10,00,000, employer PF ₹1,20,000, gratuity ₹48,100, insurance ₹15,000.

• Gross salary = ₹20,00,000 − ₹1,20,000 − ₹48,100 − ₹15,000 = ₹18,16,900
• Taxable income = ₹18,16,900 − ₹75,000 = ₹17,41,900
• Tax: ₹20,000 (4–8 lakh) + ₹40,000 (8–12 lakh) + ₹60,000 (12–16 lakh) + ₹28,380 (20% on ₹1,41,900) = ₹1,48,380
• Plus 4% cess ₹5,935 = ₹1,54,315
• Take-home = ₹18,16,900 − ₹1,20,000 (employee PF) − ₹2,500 − ₹1,54,315 = ₹15,40,085 a year, about ₹1,28,340 a month

That is about 77% of CTC. The share falls as income rises because more of each extra rupee goes to tax. Run your own breakup through the income tax calculator, and see the full rate table in our income tax slabs for FY 2026-27 guide.

Why the new regime is the default for most salaries

Under the new regime (Section 202 of the Income-tax Act, 2025, old Section 115BAC), salary up to ₹12.75 lakh is effectively tax-free after the ₹75,000 standard deduction and rebate. The old regime allows HRA, Section 123 (old 80C) and Section 126 (old 80D) deductions, but its slabs are steeper. If you pay high rent and use the full ₹1.5 lakh of 80C-type deductions, compare both. Our new vs old tax regime guide shows the break-even.

One new-regime deduction often missed: employer NPS contribution of up to 14% of basic plus DA (old Section 80CCD(2), now within Section 124). If your employer offers it, moving part of the special allowance into NPS cuts taxable income without changing CTC. Employer contributions to EPF, NPS and superannuation above ₹7.5 lakh a year in total are taxable as a perquisite.

How to check your own offer letter

1. Find basic pay. Below 50% of total pay, expect restructuring under the labour codes.
2. Separate fixed from variable. Use only fixed pay for monthly budgets.
3. Subtract employer PF, gratuity and insurance to get gross.
4. Subtract employee PF, professional tax and estimated TDS to get take-home.
5. Compare offers on take-home and benefits, not CTC alone. A higher CTC with heavy variable pay can mean less cash each month.

Once you know your real monthly figure, build your budget around it. Our salary budget guide has sample splits for different incomes.

Key takeaways

• CTC is the employer's total cost. Gross is what is paid to you. Take-home is what lands in your bank.
• Employer PF, gratuity and insurance sit in CTC but not in gross. Gratuity is paid only when you leave after qualifying service.
• Typical take-home is 70% to 85% of CTC. In our illustrative examples, ₹12 lakh CTC gives about ₹84,500 a month and ₹20 lakh gives about ₹1.28 lakh.
• As of October 2026, the labour codes' 50% wage rule and the higher EPF wage ceiling can raise PF and lower monthly take-home without changing CTC.
• Salary TDS is now under Section 392 of the Income-tax Act, 2025, and your annual certificate is Form 130 (old Form 16).