EaseValueCost to company is not salary. It is what you cost your employer, and a meaningful slice of it — the employer's provident fund contribution and the gratuity provision — is money that is set aside on your behalf and never appears in a monthly credit. Subtract your own provident fund deduction and income tax on top, and the number reaching your account is routinely 20% to 35% below the figure printed in bold on the offer letter. This calculator rebuilds the full structure from CTC: it splits the package into basic, house rent allowance, employer provident fund, gratuity provision and special allowance, computes tax under both regimes with the standard deduction under Section 19 of the Income-tax Act, 2025, the rebate under Section 156 (old Section 87A) with marginal relief, and the HRA exemption formerly under Section 10(13A) — and shows you the monthly in-hand figure alongside exactly where the missing money went.
How it’s calculated
- Basic salary is taken as a percentage of CTC — 40% by default, though Indian employers typically set it anywhere between 35% and 50%. Almost every other component is calculated from basic, so this single figure drives the whole structure.
- House rent allowance is computed as a percentage of basic, conventionally 50% in metro cities and 40% elsewhere.
- The employer's provident fund contribution is taken at 12% of basic. It sits inside CTC but is deposited to your PF account, not paid to you.
- The gratuity provision is taken at 4.81% of basic — the annualised equivalent of 15 days' salary for each year of service. It is also inside CTC and is also not paid to you monthly.
- Special allowance is the balancing figure: CTC less basic, HRA, employer PF and the gratuity provision. It absorbs whatever remains.
- Gross salary equals CTC less employer PF and the gratuity provision. This is the figure your payslip actually shows before deductions.
- Your own provident fund contribution of 12% of basic is deducted from gross salary each month and, under the old regime, counts towards the ₹1,50,000 limit for 80C-type deductions.
- Under the new regime, taxable income is gross salary less the ₹75,000 standard deduction. Slabs run nil to ₹4 lakh, 5% to ₹8 lakh, 10% to ₹12 lakh, 15% to ₹16 lakh, 20% to ₹20 lakh, 25% to ₹24 lakh and 30% above, with the Section 156 rebate making income up to ₹12 lakh tax-free and marginal relief just beyond it. Cess of 4% applies.
- Under the old regime, taxable income is gross salary less the ₹50,000 standard deduction, less the HRA exemption, less 80C-type deductions capped at ₹1,50,000. Slabs run nil to ₹2.5 lakh, 5% to ₹5 lakh, 20% to ₹10 lakh and 30% above, with rebate making income up to ₹5 lakh tax-free. Cess of 4% applies.
- The HRA exemption is the least of three figures: HRA actually received; rent paid less 10% of basic; and 50% of basic in a metro or 40% elsewhere. It is available only under the old regime.
- Monthly in-hand is gross salary less your own provident fund contribution less annual tax, divided by twelve.
Why CTC and take-home are two different numbers
The gap between the headline on an offer letter and the credit in a bank account is the most common source of disappointment in Indian employment, and it is entirely structural rather than deceptive. Cost to company means precisely what it says: the total annual cost the employer bears in employing you. That figure includes items which are genuinely spent on your behalf but never pass through your hands as salary. The two largest are the employer's provident fund contribution at 12% of basic, which goes directly to your PF account, and the gratuity provision at 4.81% of basic, an accounting provision the employer sets aside against a liability that only crystallises after five years of continuous service. Together these run to roughly 16.8% of basic — on a ₹20 lakh CTC with basic at 40%, about ₹1.34 lakh a year that was never going to appear in a payslip.
Then come the deductions from what remains. Your own provident fund contribution, another 12% of basic, is withheld each month. Income tax is deducted at source across the year. On a ₹20 lakh package the three together commonly account for four to five lakh rupees, leaving a monthly credit in the region of ₹1.25 lakh against an implied ₹1.67 lakh. Nothing here is lost — the provident fund is your money, earning tax-free interest, and gratuity becomes payable if you complete five years — but it is not spendable money this month, and that is the distinction the CTC figure obscures. The gap widens as CTC rises, because tax is progressive: at ₹8 lakh CTC the shortfall is around 11%, at ₹20 lakh it is over 23%, and at ₹60 lakh it passes 35%. Anyone comparing two offers, or budgeting an EMI against a new salary, needs the take-home number rather than the headline.
How the package is built — and why basic percentage matters more than it looks
Almost every component of an Indian salary structure is derived from basic salary, which makes the basic percentage the most consequential number in the whole package. Provident fund on both sides is 12% of basic. The gratuity provision is 4.81% of basic. House rent allowance is conventionally 50% of basic in metros and 40% elsewhere, and the HRA exemption limbs are themselves computed on basic. Whatever is left after these is the special allowance, a pure balancing figure with no rule behind it and no tax shelter attached — it exists to make the arithmetic add up to the promised CTC.
The consequence is a real trade-off that employees rarely see stated. A higher basic means larger provident fund contributions on both sides and a larger gratuity provision, so a bigger share of your CTC is diverted into retirement savings and your monthly cash falls. It also means a larger potential HRA exemption under the old regime, since two of the three limbs scale with basic. A lower basic does the reverse: more cash in hand now, a thinner retirement corpus, and a smaller HRA shelter. Neither is objectively correct. A twenty-five-year-old with rent and student debt may rationally prefer a low basic; someone with a mortgage and a long horizon usually benefits from a high one, since employer PF is effectively tax-free compounding. Try the calculator at 35%, 40% and 50% on the same CTC and the difference in monthly cash is immediately visible — and it is worth asking about, because some employers will flex it at the offer stage even when they will not move on CTC.
New regime against old — which one leaves you with more
The new regime is now the default and, for the large majority of salaried employees, the better answer. It offers a ₹75,000 standard deduction under Section 19 of the Income-tax Act, 2025, wider slabs running nil to ₹4 lakh then 5%, 10%, 15%, 20%, 25% and 30% in ₹4 lakh steps, and a rebate under Section 156 (old Section 87A) that makes taxable income up to ₹12 lakh entirely tax-free. What it withdraws is almost every deduction: no HRA exemption, no 80C, no 80D medical insurance, no housing-loan interest on a self-occupied property. The old regime keeps all of those but pairs them with a ₹50,000 standard deduction and much narrower slabs — 20% begins at ₹5 lakh and 30% at ₹10 lakh, where the new regime is still at 10% and 15% respectively.
The arithmetic that decides between them is straightforward in principle: the old regime wins only when your deductions are large enough to outweigh both the extra ₹25,000 of standard deduction and the substantially wider slabs. In practice that means a salaried employee generally needs to be claiming a meaningful HRA exemption and the full ₹1.5 lakh of 80C and usually housing-loan interest or 80D on top before the old regime pulls ahead — and the higher the income, the more deductions are required to bridge the gap. The single biggest swing factor is rent. Someone paying substantial rent in a metro on a high basic can claim an HRA exemption of several lakhs, which the new regime simply does not recognise. Someone living in their own home or with family has nothing to shelter and the new regime is almost always superior. The calculator computes both and tells you which side you are on, and by how much — the comparison is the point, since the choice can be worth ₹50,000 a year or more on the same package.
The HRA exemption — three limbs, and the one that usually binds
The HRA exemption, formerly Section 10(13A), is the most valuable deduction available to a salaried tenant under the old regime, and it is calculated as the least of three figures: the HRA actually received; the rent paid less 10% of basic salary; and 50% of basic if you live in a metro or 40% if you do not. Because it is the least of three, the exemption is capped by whichever limb is smallest, and understanding which limb binds tells you whether anything can be done about it. If the second limb binds you are not paying enough rent relative to your basic to use the full allowance. If the third binds, your basic is the constraint. If the first binds, your employer has simply not allocated much of the package to HRA.
Two traps deserve attention. The first is the metro definition: only Delhi, Mumbai, Kolkata and Chennai qualify. Bengaluru, Hyderabad, Pune, Gurgaon and Noida do not, despite rents that frequently exceed those in the listed cities, and an employee in Bengaluru claiming the 50% limb is overstating the exemption. The second is documentation. Rent must actually be paid, and the claim needs rent receipts; where annual rent exceeds ₹1,00,000 the landlord's PAN must be reported to the employer. Rent paid to a parent is allowed provided the arrangement is genuine — the parent must own the property, the rent must actually be transferred, and the parent must offer it as house property income under Sections 20 to 24 of the Income-tax Act, 2025. Rent paid to a spouse is generally not accepted. Note finally that none of this survives the new regime: an employee who switches to the new regime and continues to think of their HRA as sheltered is simply mis-estimating their tax by the whole amount.
The ₹12 lakh cliff, marginal relief, and what happens just above it
The rebate under Section 156 of the Income-tax Act, 2025 makes taxable income up to ₹12 lakh free of tax under the new regime. With the ₹75,000 standard deduction on top, a salaried employee with gross salary up to ₹12.75 lakh pays nothing at all. This is a dramatic threshold, and taken literally it would create a cliff: at ₹12,00,000 the tax is nil, and at ₹12,00,100 the full slab computation of roughly ₹60,000 would apply, so an extra hundred rupees of income would cost sixty thousand in tax.
The law prevents this with marginal relief. Just above the rebate threshold, tax is limited to the amount by which income exceeds ₹12 lakh — so at a taxable income of ₹12,10,000, the tax is ₹10,000 rather than ₹61,500, and the relief tapers away as income rises until the ordinary computation becomes the lower figure. The practical effect is a band immediately above ₹12 lakh where your effective marginal rate is 100% of the extra income and no more: you never end up worse off for earning more, but you gain nothing either until you clear the band. The calculator applies this correctly, which matters because a great many spreadsheets do not and show a taxpayer at ₹12.2 lakh owing several times what they actually owe. If you are negotiating a package that lands close to this line, the marginal relief band is worth understanding — a small increase in CTC in that zone delivers no additional take-home, and a slightly larger increase is needed before the raise begins to reach you.
Reading the offer letter — and what this calculator deliberately leaves out
A CTC figure is only as meaningful as its breakup, and some packages inflate the headline with items that are neither cash nor certain. Watch for a variable or performance component presented inside CTC as though it were guaranteed — it is typically paid annually, often prorated, and may not be paid at all. Watch for joining and retention bonuses amortised into the annual figure, which arrive once and then disappear from year two. Watch for employer-paid insurance premiums and notional perquisites, which are real value but not spendable. And be aware that an employer contributing to the National Pension System on your behalf adds to CTC while further reducing monthly cash. Two offers with identical CTC can differ by twenty percent in what actually reaches your account each month, which is exactly why the take-home figure rather than the headline is the number to compare.
This calculator models the standard structure and, for clarity, leaves some things out. It does not include professional tax, a state levy of up to ₹2,500 a year in states that impose it. It does not model the Employees' State Insurance contribution, relevant only at lower wage levels, nor the higher pension or voluntary provident fund options some employees elect. It assumes twelve equal monthly payments, so any bonus or variable pay is spread evenly rather than landing as a lump sum with a different tax profile. It applies surcharge with marginal relief on higher incomes but does not attempt every edge case in that area. And it computes annual tax rather than modelling the month-by-month TDS your employer will actually deduct — the yearly totals reconcile, but individual months vary, particularly where you switch regimes mid-year or submit investment proofs late and the employer front-loads deduction to catch up. For the purpose the calculator exists to serve — knowing what a package is truly worth before you accept it — the annual view is the right one.
Frequently asked questions
Why is my in-hand so much lower than my CTC?
Because CTC includes money that is never paid to you as salary. The employer's provident fund contribution at 12% of basic and the gratuity provision at 4.81% of basic are both inside the CTC figure but go to your PF account and to a provision respectively. Your own PF of 12% of basic is then deducted monthly, and income tax on top. The gap runs about 11% at ₹8 lakh CTC, over 23% at ₹20 lakh and past 35% at ₹60 lakh — the tax component grows because the slabs are progressive.
Should I choose the new regime or the old one?
For most salaried employees, the new regime. It gives a ₹75,000 standard deduction, much wider slabs, and a Section 156 rebate that makes income up to ₹12 lakh tax-free — but no HRA exemption and no 80C. The old regime wins only when your deductions are large enough to overcome both the narrower slabs and the smaller ₹50,000 standard deduction, which in practice usually means substantial rent in a metro plus the full ₹1.5 lakh of 80C plus housing-loan interest or 80D. The calculator computes both and tells you the difference in rupees.
Does a higher basic salary help or hurt me?
It depends on your priorities. A higher basic increases provident fund on both sides and the gratuity provision, so more of your CTC is diverted into retirement savings and your monthly cash falls — but under the old regime it also raises your possible HRA exemption, since two of the three limbs are computed on basic. A lower basic gives more cash now and a thinner corpus. Neither is objectively right. Run the calculator at 35%, 40% and 50% on the same CTC to see the trade-off in numbers.
Which cities count as metro for HRA?
Only Delhi, Mumbai, Kolkata and Chennai. Bengaluru, Hyderabad, Pune, Gurgaon and Noida do not qualify, regardless of how high rents are there. In a metro the third limb of the exemption is 50% of basic; elsewhere it is 40%. Claiming the metro rate from a non-metro city is a common and easily detected error.
Can I claim HRA on rent paid to my parents?
Yes, provided the arrangement is genuine. The parent must actually own the property, the rent must genuinely be transferred — a bank transfer, not a notional entry — and the parent must declare it as house property income under Sections 20 to 24 of the Income-tax Act, 2025. Keep a rent agreement and receipts, and report the landlord's PAN to your employer where annual rent exceeds ₹1,00,000. Rent paid to a spouse is generally not accepted. And remember that none of this is available at all under the new regime.
What happens if my income is just above ₹12 lakh?
Marginal relief protects you. Without it, crossing ₹12 lakh of taxable income would jump your tax from nil to roughly ₹60,000, so the law limits tax in that band to the amount by which income exceeds ₹12 lakh — ₹10,000 of tax on ₹12.10 lakh of income, for instance. The relief tapers off as income rises. The practical effect is a band just above the threshold where extra income brings no extra take-home, so a small raise in that zone is worth less than it appears.
Is the gratuity provision money I will actually receive?
Only if you complete five years of continuous service with that employer, at which point gratuity becomes payable at approximately 15 days' salary for each completed year. The 4.81% of basic shown in your CTC is the annualised provision the employer sets aside against that future liability — it is not paid to you monthly and it is forfeited if you leave before five years. This is why it should be treated as a contingent benefit rather than salary when comparing offers, particularly for a role you may not stay in that long.
Does this calculator include professional tax and other deductions?
No. Professional tax is a state levy of up to ₹2,500 a year in the states that impose it, and it is not modelled here — subtract it separately if your state charges it. The calculator also excludes the Employees' State Insurance contribution, voluntary provident fund, and any employer contribution to the National Pension System. It computes annual tax rather than the month-by-month TDS your employer deducts, so the yearly totals reconcile even though individual months will vary.
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