When a company says "We're offering you 12 LPA", what they actually mean is your CTC (Cost to Company) is ₹12,00,000 per year. But the amount that lands in your bank account every month will be considerably less — often 20-30% less.
Understanding this gap is one of the most important things a salaried professional in India can know.
What is CTC?
CTC stands for Cost to Company — the total amount an employer spends on you annually. It includes everything:
| Component | Example (12 LPA) |
|---|---|
| Basic Salary | ₹4,80,000 |
| HRA (House Rent Allowance) | ₹2,40,000 |
| Special Allowance | ₹2,49,072 |
| Employer PF Contribution | ₹57,600 |
| Gratuity | ₹23,077 |
| Total CTC | ₹12,00,000 |
Notice that employer PF and gratuity are part of CTC but not part of your monthly salary. Gratuity is only paid after 5 years of service, and employer PF goes into your EPF account — not your bank account.
What is In-Hand Salary?
In-hand salary (also called take-home salary or net salary) is what you actually receive in your bank account after all deductions.
From your gross monthly salary, the following are deducted:
- Employee PF — 12% of basic salary
- Professional Tax — ₹200/month in most states
- Income Tax (TDS) — based on your annual tax liability
The CTC to In-Hand Formula
There's no single formula because income tax is progressive, but here's the rough flow:
CTC
− Employer PF & Gratuity (not paid monthly)
= Gross Salary
− Employee PF (12% of basic)
− Professional Tax
− Income Tax (TDS)
= In-Hand Salary
For a 12 LPA CTC, a typical in-hand salary under the new tax regime is around ₹84,000–₹87,000 per month, depending on your employer's exact salary structure.
Quick tip: Use our salary calculator to get the exact breakdown for any CTC.
Why Do Companies Show CTC Instead of In-Hand?
Legally, there's no obligation to quote CTC — companies do it because it's a larger, more impressive number. It's not deceptive per se, since CTC represents real costs the employer bears. But it does create confusion for candidates comparing offers.
Old Regime vs New Regime Impact
The tax regime you choose also affects your in-hand:
| New Regime | Old Regime | |
|---|---|---|
| Tax on 12 LPA | ₹83,200/yr | ₹1,09,200/yr |
| Monthly TDS | ₹6,933 | ₹9,100 |
| In-hand (approx) | ₹86,900/mo | ₹84,700/mo |
The new regime is better for most people at 12 LPA with no major deductions.
Key Takeaways
- CTC ≠ In-hand salary
- The gap is typically 20–30% depending on tax liability
- Always ask for the in-hand breakup before accepting an offer
- Use the CTC to in-hand calculator when negotiating
Have a salary question? Try our salary calculator for a detailed breakdown.