Why is my in-hand salary lower than my CTC?
Last checked 3 Nov 2026 · by BachatLab
CTC is everything the company spends on you, not what reaches your bank. Your employer’s PF, gratuity and variable pay sit inside it, and your own PF and income tax come out of what is left.
- CTC
- ₹12,00,000 a year
- Employer’s PF (12% of basic)
- −₹72,000
- Gratuity (4.81% of basic, paid when you leave, usually after 5 years)
- −₹28,860
- Variable pay (paid later, if earned)
- −₹1,00,000
- Fixed salary
- ₹9,99,140 a year: ₹83,262 a month
- Your PF (12% of basic)
- −₹6,000 a month
- Income tax
- ₹0: taxable ₹10,24,140 (with the variable pay, less the ₹75,000 standard deduction) is under ₹12 lakh
- In hand
- about ₹77,262 a month
Your state’s professional tax (up to ₹2,500 a year) comes off too. 4.81% is 15 days’ pay a year: 15 ÷ 26 ÷ 12. An example, not a quote: your payslip shows yours.
| Taxable income, tax year 2026-27 (new regime) | Tax |
|---|---|
| Up to ₹4 lakh | Tax Nil |
| ₹4 lakh to ₹8 lakh | Tax 5% |
| ₹8 lakh to ₹12 lakh | Tax 10% |
| ₹12 lakh to ₹16 lakh | Tax 15% |
| ₹16 lakh to ₹20 lakh | Tax 20% |
| ₹20 lakh to ₹24 lakh | Tax 25% |
| Above ₹24 lakh | Tax 30% |
No tax up to ₹12 lakh of taxable income (a rebate), so up to ₹12.75 lakh of salary with the standard deduction. Above that, 4% cess is added to the tax.
What changed recently
- The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026. Section 80C is now section 123, 80CCD(2) is 124, 87A is 156, and the new regime is section 202.
- The PF wage ceiling went up from ₹15,000 to ₹25,000 a month on 17 September 2026.
- Under the Labour Codes (from 21 November 2025), allowances above half your pay are added back to wages for PF and gratuity.
Ask HR
- Is my PF on my full basic, or capped at the ceiling?
- Is gratuity inside my CTC?
- Can I have company NPS? In the new regime, up to 14% of basic plus DA is tax-free (section 124).
Sources
- Income-tax Act, 2025: section 202 (new regime rates)
- Income-tax Act, 2025: section 156 (rebate up to ₹12 lakh)
- Income-tax Act, 2025: section 124 (employer NPS)
- PIB: PF wage ceiling raised to ₹25,000 (23 September 2026)
- EPFO: contribution rates (FAQ)
- Ministry of Labour: Code on Social Security FAQ (wages, gratuity)
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