How CTC becomes in-hand salary
Cost to company is everything your employer spends on you in a year. Some of it never reaches your bank account every month:
- Employer’s PF: most offers count the employer’s 12% PF contribution inside CTC. It goes to your EPF and pension accounts, not your salary.
- Gratuity: some employers also show a gratuity provision of about 4.81% of basic in CTC. You only receive it when you leave after five years (one year for fixed-term staff).
- Variable pay: bonuses are paid quarterly or yearly, and only if targets are met, so we keep them out of the monthly figure.
From the gross salary that is left, your employer deducts your own 12% PF contribution, professional tax and income tax (TDS), spread over the year. What remains is your in-hand pay.
Figures used for 2026-27
The new regime is the default. Its standard deduction for salaried people is ₹75,000, and a rebate makes tax nil when taxable income is up to ₹12 lakh, with marginal relief just above that. In practice a salary of up to ₹12.75 lakh pays no income tax under the new regime. The old regime keeps the ₹50,000 standard deduction and lets you claim HRA, 80C, 80D and other deductions. A 4% health and education cess is added to the tax, and a surcharge applies above ₹50 lakh.
| Taxable income (new regime) | Rate |
|---|---|
| up to ₹4 lakh | 0% |
| ₹4 lakh – ₹8 lakh | 5% |
| ₹8 lakh – ₹12 lakh | 10% |
| ₹12 lakh – ₹16 lakh | 15% |
| ₹16 lakh – ₹20 lakh | 20% |
| ₹20 lakh – ₹24 lakh | 25% |
| above ₹24 lakh | 30% |
PF wage ceiling: from 17 September 2026 the statutory EPF wage ceiling is ₹25,000 a month (it was ₹15,000). Many employers deduct 12% of PF wages up to the ceiling (₹3,000 a month at most); others deduct 12% of your full basic. Pick the option your payslip shows.
Professional tax is charged by some states on salaried employees. No state can charge more than ₹2,500 a year. It is deductible only under the old regime.
From 1 April 2026 the Income-tax Act, 2025 replaced the 1961 Act and many section numbers changed. The rates, rebate and deductions used here did not change, so we use the familiar names such as 80C and 87A.
Not included: employer NPS contributions, the tax-free part of meal cards or other reimbursements, and income from anything other than salary. To see which regime is better for you, use the old vs new regime calculator.
Sources
- Income Tax Department: tax rates for individuals
- Union Budget 2026-27
- Income Tax Department: Income-tax Act, 2025 in force from 1 April 2026 (PDF)
- e-Filing portal: objective and scope of the new Act (FAQ)
- PIB (Ministry of Labour & Employment): EPF wage ceiling raised to ₹25,000
- Ministry of Labour & Employment (labour codes)
Figures last checked against these sources on 4 November 2026. This tool gives an estimate for planning, not tax, legal or financial advice.