Why CTC and take-home differ
Cost to company is what your employer spends on you; take-home pay is what reaches your bank account. The gap between them is normal and often large, because CTC includes contributions you never see and deductions that leave before payday.
What sits inside CTC but never reaches you
A typical CTC bundles your fixed salary, the employer’s provident fund contribution, a gratuity provision, group health and life insurance premiums, and sometimes meal cards or a variable bonus that depends on performance.
The employer PF contribution and gratuity provision are genuinely yours, but only later — PF at exit or retirement, gratuity after five years of service. Insurance premiums are a benefit you consume rather than money you can spend.
The three deductions that shape your payslip
Your own provident fund contribution is typically 12% of basic salary, matched by the employer. Professional tax is a small state levy, often around ₹200 a month where it applies. Income tax is deducted at source each month based on your projected annual liability.
The first two are predictable. TDS is the variable one: declaring your investments and rent to your employer early in the year spreads the deduction evenly, while declaring late means heavy deductions in the final months.
Why two identical CTCs pay differently
Salary structure matters as much as the headline number. A structure with a lower basic salary reduces PF contributions on both sides, which raises immediate take-home while lowering forced retirement savings.
A large variable component has the same effect in reverse: a ₹20 lakh CTC with ₹4 lakh of performance pay delivers a much smaller monthly credit than a ₹20 lakh CTC that is entirely fixed.
Reading an offer letter properly
Ask three questions before comparing offers. What is the fixed component versus variable? What is the basic salary, since PF, gratuity, and HRA exemption all derive from it? And which benefits are reimbursements requiring bills rather than cash allowances?
Then run the fixed component through this calculator. Comparing take-home against take-home is the only fair comparison between two offers with different structures.
Where a ₹12 lakh CTC goes
- Annual CTC
- ₹12,00,000
- Less employer PF (12% of basic)
- Credited to your PF account
- Less gratuity provision
- Payable after 5 years of service
- Less employee PF
- Credited to your PF account
- Less professional tax
- ≈ ₹2,400 a year where applicable
- Less TDS
- Depends on regime and deductions
Take-home is typically 70-85% of CTC for salaried employees, with the exact figure driven by your basic salary percentage, variable pay, and tax regime.