What is the difference between CTC, gross salary and net salary?

CTC (Cost to Company) is what the employer spends on you, including employer PF, gratuity, and all allowances. Gross Salary is CTC minus employer PF and gratuity — what is actually credited before deductions. Net/Take-Home salary is what lands in your bank after all deductions (employee PF, professional tax, income tax).

When do I get gratuity?

Gratuity is paid on leaving a company after completing at least 5 continuous years of service. The formula is: (Basic Salary × 15 × Years of Service) / 26. It is tax-free up to ₹20 lakh for private sector employees.

Is variable pay included in CTC?

Yes, variable pay (also called performance bonus or PLI) is usually included in CTC but is not guaranteed. It may be 10–30% of CTC and depends on individual and company performance. Fixed CTC = CTC minus variable component.

How can I increase my take-home salary?

You can increase take-home by: (1) Opting for new tax regime if your deductions are low. (2) Using NPS (employer contribution under 80CCD(2) reduces taxable income in both regimes). (3) Claiming HRA exemption by paying rent. (4) Using meal vouchers/food allowance (up to ₹2,200/month tax-free). (5) Leave Travel Allowance (LTA) for travel. (6) Reimbursements for internet, phone, books.

What is a flexi basket in salary?

A flexi basket (also called flexible benefit plan) allows you to choose how certain allowances are structured. You pick from a menu — LTA, medical reimbursement, internet allowance, meal vouchers, uniform allowance etc. Choosing tax-efficient components from the flexi basket can reduce your tax significantly.

Salary Calculator — Calculate Take-Home Pay in India

Q: Can I opt out of EPF?

If your basic salary is above ₹15,000/month at the time of joining and you have never been an EPF member, you can opt out. Existing EPF members cannot opt out. For salaries above ₹15,000 basic, PF contribution is voluntary beyond the statutory limit, but most employers deduct on actual basic.

Salary Inputs

Annual CTC (₹)

Cost to Company — total employer spend per year

Basic Salary (% of CTC)40%

Basic: ₹4,00,000/yr · Higher basic = more PF, more tax

HRA (% of Basic)50%

City Type

Metro Non-Metro

Monthly Rent Paid (₹)

PF in CTC?

Yes, PF included No, PF extra

Most companies include Employer PF (12% of basic) in CTC. Toggle if yours does not.

Professional Tax (₹/yr)

Tax Regime

Old Regime New Regime

Annual Take-Home Salary

Net In-Hand (Annual)

₹9,60,000

Monthly: ₹80,000

Gross CTC

₹12,00,000

Gross Salary

₹10,98,120

Total Tax

₹0

Total Deductions

₹2,40,000

Full Salary Breakdown

Component	Annual (₹)	Monthly (₹)

CTC Breakdown — Where Your Salary Goes

CTC vs Gross Salary vs Net Salary — What's the Difference?

Most employees confuse these three terms, especially when negotiating a job offer. Here's the exact definition of each:

CTC (Cost to Company) = everything the employer spends on you, including components you never directly receive.
Gross Salary = CTC minus employer PF contribution and gratuity component.
Net / Take-Home Salary = Gross Salary minus all employee deductions (PF, professional tax, income tax, HRA exemption benefit).

What is Included in CTC?

A typical CTC structure for a salaried Indian employee:

Component	% of CTC (approx)	Notes
Basic Salary	40–50%	Base for PF, gratuity, HRA, income tax
HRA	40–50% of Basic	50% for metro, 40% for non-metro
Special Allowance	Remaining	Fully taxable
Employer PF Contribution	12% of Basic	Goes to your EPF account
Gratuity Component	4.81% of Basic	Paid on exit after 5 years
Medical Allowance	~1%	Up to ₹15,000/yr exempt
Variable Pay	10–30%	Performance-linked, not guaranteed

How PF is Calculated

Both employee and employer contribute 12% of basic salary to the Employees' Provident Fund (EPF). The employer's 12% is split: 8.33% goes to EPS (Pension Scheme) and 3.67% goes to EPF account. The employee's full 12% goes to EPF.

Employee PF = 12% of Basic Salary Employer PF = 12% of Basic Salary → 8.33% to EPS (capped at ₹1,250/month if basic ≤ ₹15,000) → 3.67% to EPF account For statutory calculation, PF is on basic up to ₹15,000/month. Many employers deduct on actual basic (voluntary higher PF).

Gratuity Formula

Gratuity is a reward for loyalty. It is paid when you leave after completing 5 continuous years. The formula:

Gratuity = (Basic Salary × 15 × Years of Service) / 26 Example: Basic = ₹40,000/month, 8 years service Gratuity = (40,000 × 15 × 8) / 26 = ₹1,84,615 Tax-free up to ₹20,00,000 for private employees. Government employees: entirely tax-free.

The gratuity component in your CTC (shown as ~4.81% of basic) is the annual accrual set aside by the company. You only receive it on exit after 5 years — it is not part of your monthly salary.

Professional Tax by State

State	Annual PT	Monthly Deduction
Maharashtra	₹2,400	₹200 (Feb: ₹300)
Karnataka	₹2,400	₹200
West Bengal	₹2,400	₹200
Tamil Nadu	₹1,800	₹150
Andhra Pradesh	₹1,200–₹2,400	Varies by salary slab
Gujarat	₹1,800–₹2,400	Slab-based
Delhi	Nil	No professional tax
Uttar Pradesh	Nil	No professional tax
Rajasthan	Nil	No professional tax

How to Increase Your Take-Home Salary

Optimize tax regime: If your deductions are low, new regime gives more take-home
NPS via employer: Employer NPS contribution (80CCD(2)) reduces taxable income in both regimes — the most powerful tool
HRA + rent: Claim HRA exemption by paying rent (even to parents, with proper documentation)
Meal vouchers / food allowance: Up to ₹26,400/year (₹2,200/month) is tax-free
Leave Travel Allowance (LTA): 2 trips in a 4-year block, actual travel costs tax-free
Internet/phone reimbursement: Actual bills reimbursed are typically tax-free
Voluntary PF reduction: If legal in your org, reducing VPF increases take-home (but reduces long-term savings)

Frequently Asked Questions

What is the difference between CTC, gross and net salary? +

CTC is everything the employer spends — including employer PF (12% of basic), gratuity (4.81% of basic), and all allowances. Gross Salary is CTC minus employer PF and gratuity — the amount on which deductions are applied. Net / Take-Home is gross minus employee PF (12% of basic), professional tax, and income tax.

Can I opt out of EPF if my salary is high? +

If your basic salary exceeds ₹15,000/month at the time of joining the organisation and you have never been an EPF member before, you can opt out by submitting Form 11. However, existing EPF members cannot opt out. Most companies deduct PF on actual basic — you can request voluntary PF reduction to the statutory limit (12% of ₹15,000 = ₹1,800/month) to increase take-home.

When do I receive gratuity and how much? +

Gratuity is payable when you leave a company after completing 5 continuous years of service. The formula is: (Last Basic Salary × 15 × Years of Service) / 26. It is tax-free up to ₹20 lakh for private sector employees. If you leave before 5 years, you forfeit the gratuity (except in case of death or disability).

Is variable pay included in my CTC? +

Yes, variable pay (performance bonus / PLI / target incentive) is typically included in the CTC figure quoted at the time of offer. It is not guaranteed — it depends on individual and company performance. Always ask for your "fixed CTC" to understand the guaranteed component. Variable pay is typically 10–30% of total CTC.

How can I maximise my take-home salary? +

Key strategies: (1) Choose the right tax regime — new regime is better if deductions are low. (2) Ask employer to contribute to NPS via 80CCD(2) — reduces taxable income in both regimes. (3) Claim HRA exemption by officially paying rent (to parents is valid with proper rent agreement and PAN). (4) Use meal vouchers, LTA, and reimbursements from the flexible benefit plan. (5) If eligible, reduce voluntary PF to statutory minimum to increase take-home.

What is a flexible benefit plan (FBP) or flexi basket? +

A flexible benefit plan lets you decide how a portion of your salary is structured. Instead of fully taxable special allowance, you can allocate money to tax-efficient components: meal vouchers (₹2,200/month tax-free), LTA (travel tax-free), internet reimbursement, books and periodicals, uniform allowance etc. Properly optimizing your flexi basket can save ₹30,000–₹60,000 in taxes per year depending on your salary level.

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