Offer Letter Decoder: CTC to In-Hand

Why in-hand salary is less than CTC ÷ 12

CTC is what the company spends on you in a year, not what you are paid. It includes the employer's PF contribution and gratuity, which are set aside for later; variable pay and joining bonuses, which come once a year and only if paid; and sometimes insurance, meal cards or stock, which are not cash. From the monthly salary that is left, your own PF share, professional tax and income tax are deducted before it reaches your bank.

How each part is worked out

Basic salary is the percentage of CTC you enter (check the breakup table in the offer; 40–50% is typical). Employer and employee PF are each 12% of basic, or 12% of ₹15,000 when the company caps it. Gratuity in CTC is 4.81% of basic, which is 15 days of basic for every year of service. HRA is taken as half of basic. Whatever is left after the extras is the special allowance. Income tax uses the FY 2025-26 rules for both regimes, and the page uses whichever leaves you more cash.

Variable pay and joining bonus

Variable pay depends on your rating and the company's year, and is often paid at 60–90% of the target. Enter the payout you expect, not the maximum. It is paid once or twice a year, and it is taxed at your highest slab, so the amount that lands is smaller than it looks. A joining bonus counts in year one only and usually has to be returned if you leave within a year; read the clawback clause.

Comparing two offers

Switch to Compare two and enter both offers, or your current salary as Offer A. The table shows the change in CTC next to the change in monthly in-hand pay. A 30% CTC hike can mean a 20% rise in what you actually receive, especially when the new CTC adds variable pay, stock or a joining bonus. Negotiate on the fixed part: it is paid every month, it grows with each raise, and it is what your next employer will ask about.

Old or new tax regime?

The new regime has lower slab rates and a ₹75,000 standard deduction, and income up to ₹12 lakh after it is tax-free. The old regime allows HRA exemption, 80C, 80D and home-loan interest. If you pay rent in a big city and invest in 80C, open the deductions section and add them; the page compares both and shows which leaves more in your bank. Tell your employer your choice at the start of the year so the monthly TDS matches.

Estimates, not your payslip

Companies structure salaries differently: some pay LTA, food coupons or reimbursements that change the tax slightly, some deduct group insurance premiums, and the monthly TDS is adjusted through the year. Use this to compare offers and plan, then check the first payslip. Stock is not counted as cash here because its value and tax depend on when it vests and what you sell. Nothing you type leaves your browser.