# CTC to in-hand salary: where a ₹12 lakh package actually goes

> A ₹12 lakh CTC does not arrive as ₹1 lakh a month. Employer PF, gratuity, your own PF and professional tax come out first. In a typical split with a 40% basic, about ₹88,000 a month reaches your account before income tax. Here is the step-by-step walk from CTC to credit alert.

Published 2026-10-08 by Toolcloak. 4 minute read. Original: https://toolcloak.pages.dev/articles/ctc-to-in-hand-salary-where-a-12-lakh-package-actually-goes
Related free tool: [In-Hand Salary Calculator (CTC to Take-Home, India)](https://toolcloak.pages.dev/tools/in-hand-salary-calculator)

When an offer letter says ₹12 lakh, most people divide by twelve and plan for ₹1 lakh a month. The first salary credit is a shock. Nobody lied. CTC stands for cost to company, and it counts several things the company spends on you that never pass through your hands.

> **In short**
> - **CTC is what the employer spends, not what you receive.** It includes employer PF, gratuity and sometimes insurance or bonuses paid later.
> - In our example, ₹12,00,000 CTC with a 40% basic leaves about **₹10.59 lakh a year, or ₹88,276 a month, before income tax**.
> - A **higher basic share lowers take-home** because PF and gratuity are calculated on the basic. Moving from 30% to 50% basic changes the monthly figure by about ₹5,800.
> - Every company’s structure is different. This is an illustration with stated assumptions, so check your own offer letter.

## The assumptions

To keep the arithmetic clear, we use a simple structure. Real offer letters vary, and some include variable pay, insurance premiums, meal cards or joining bonuses.

- CTC ₹12,00,000 a year.
- Basic salary is 40% of CTC: ₹4,80,000 a year (₹40,000 a month).
- Employer PF is 12% of basic: ₹57,600 a year.
- Employee PF is also 12% of basic: ₹57,600 a year.
- Gratuity provision is 4.81% of basic: ₹23,088 a year.
- Professional tax is ₹2,400 a year (₹200 a month). It depends on the state, and some states charge none.
- Income tax is **not** included yet, because it depends on your regime and deductions.

## From CTC to the bank, step by step

**₹12 lakh CTC to yearly in-hand pay before income tax (₹ lakh)**

| Step | Amount |
| --- | --- |
| CTC | ₹12.00 L |
| Employer PF | −0.58 |
| Gratuity | −0.23 |
| Gross salary | ₹11.19 L |
| Your PF | −0.58 |
| Prof. tax | −0.02 |
| In-hand | ₹10.59 L |

*Gross salary is what the company pays out as monthly salary (₹93,276). After your own PF and professional tax, ₹88,276 a month remains before income tax.*

Two things in that picture are not lost. The employer PF and your own PF both go into your provident fund account, and the gratuity provision is paid when you leave after the required service. They are part of what you earn, they are just not spendable today. Our [gratuity guide](https://toolcloak.pages.dev/articles/gratuity-formula-15-by-26-what-your-years-of-service-are-worth) shows how large that gratuity can become.

Try it: [In-Hand Salary Calculator (CTC to Take-Home, India)](https://toolcloak.pages.dev/tools/in-hand-salary-calculator). Enter your CTC and basic to see a month-by-month take-home estimate.

**The monthly view**

|  | Value | Note |
| --- | --- | --- |
| CTC ÷ 12 | ₹1,00,000 | What most people expect |
| Gross monthly salary | ₹93,276 | After employer PF and gratuity |
| In-hand before tax | ₹88,276 | After your PF and prof. tax |

## Why the basic share matters

Provident fund and gratuity are both calculated on basic pay. If a larger part of your CTC is labelled basic, more goes into PF and gratuity and less is available as cash each month. The money is not gone, but you cannot spend it now.

**Monthly in-hand before income tax for ₹12 lakh CTC, by basic share**

|  | Value |
| --- | --- |
| Basic 30% | ₹91,157 |
| Basic 40% | ₹88,276 |
| Basic 50% | ₹85,395 |

*Each 10-point step in the basic share changes take-home by about ₹2,900 a month. In return you build a bigger PF and gratuity.*

## Other CTC levels

**Monthly in-hand before income tax (₹)**

| CTC a year | Basic 30% | Basic 40% | Basic 50% |
| --- | --- | --- | --- |
| ₹6 lakh | ₹45,479 | ₹44,038 | ₹42,598 |
| ₹12 lakh | ₹91,157 | ₹88,276 | ₹85,395 |
| ₹18 lakh | ₹1,36,836 | ₹1,32,514 | ₹1,28,193 |
| ₹24 lakh | ₹1,82,514 | ₹1,76,752 | ₹1,70,990 |

## Where income tax comes in

Income tax is taken from your gross salary through the year (TDS). How much depends on the tax regime you choose, your deductions and any other income. Employers apply the regime you declare, and many switch you to the default if you do not choose. That is why two colleagues with the same CTC can see very different take-home.

> **Check the rules for the current year:** Slabs, rebates, the standard deduction and regime defaults are revised in the Union Budget. Use your employer’s declaration form or a current tax calculator before you rely on a number.

## Questions to ask before accepting an offer

1. **What is the basic salary and what is the PF base?** Some employers calculate PF on the full basic, others on a ceiling of ₹15,000 of wages. The difference is large.
2. **Is any part of the CTC variable?** A bonus that is “up to” a figure may be paid late, in part or not at all.
3. **Are insurance, food coupons or reimbursements inside the CTC?** These are real benefits, but they do not arrive as cash.
4. **How much is the joining or retention bonus, and is it repayable?** If you leave early you may have to give it back.
5. **What is the notice period buyout?** It can matter more than a ₹50,000 difference in pay.

> **Compare offers on in-hand, not on CTC:** Two offers can have the same CTC and a ₹4,000 a month difference in take-home. Put both into a calculator with the same assumptions and compare the monthly figure, then add the value of PF, gratuity and insurance on top.

## What to do with the difference

Once you know your real monthly figure, build the budget from it, not from the CTC. Set aside an [emergency fund](https://toolcloak.pages.dev/articles/how-big-should-an-emergency-fund-be) first, and then start a monthly investment. Even a small one adds up, as shown in [start at 25 or 35](https://toolcloak.pages.dev/articles/start-at-25-or-35-what-waiting-ten-years-really-costs).

## Frequently asked questions

### How do I convert CTC to in-hand salary?

Subtract the employer PF, gratuity and any other employer-side benefits to get gross salary. Then subtract your own PF, professional tax, income tax and any other deductions.

### Why is my in-hand salary less than CTC divided by 12?

CTC includes employer PF, gratuity and benefits that are not paid in cash each month, and your own PF, taxes and professional tax are deducted before the credit.

### Does a higher basic salary reduce in-hand pay?

Usually yes, because PF and gratuity are calculated on basic. The money goes to your PF and gratuity instead of your bank account.

### Is PF part of my salary?

Yes. Both the employer and employee contributions are your money and earn interest in your PF account, but you cannot spend them until withdrawal conditions are met.

### What is the professional tax?

It is a state tax on salaried people. The amount depends on the state and slab, and some states do not charge it.