How it is worked out
CTC (cost to company) is everything an employer spends on a person in a year. Part of it never reaches the employee's bank account: the employer's own PF contribution, its ESI contribution and, where a company includes it, a provision for gratuity. What is left is gross pay. From gross pay come the employee's PF, the employee's ESI, professional tax and income tax deducted at source (TDS). What remains is in-hand salary.
Basic pay drives most of it. PF is 12% of basic (plus DA); HRA is usually a share of basic; gratuity is calculated on basic. A higher basic means more saved in PF and a larger gratuity, and slightly less in hand each month.
The rules used
- Employee and employer PF: 12% each of basic + DA. Employers may cap the PF wage at ₹15,000 (₹1,800 a month each) or contribute on the full basic.
- ESI: 0.75% from the employee and 3.25% from the employer when gross pay is ₹21,000 a month or less.
- Professional tax: by state — Maharashtra and Karnataka ₹200 a month (₹300 in February) above their thresholds, West Bengal ₹110–₹200, Tamil Nadu half-yearly, Gujarat ₹200, Telangana and Andhra Pradesh ₹150–₹200, Madhya Pradesh up to ₹2,500 a year, Delhi none.
- Income tax, new regime FY 2026-27: standard deduction ₹75,000; slabs nil up to ₹4 lakh, then 5%, 10%, 15%, 20%, 25% in ₹4 lakh steps and 30% above ₹24 lakh; no tax when taxable income is ₹12 lakh or less (rebate up to ₹60,000, with marginal relief just above); surcharge above ₹50 lakh; 4% cess.
- Under the new regime, professional tax and the employee's PF do not reduce taxable income. The employer's PF is not taxed here (it is taxable only above ₹7.5 lakh a year of employer retirement contributions).
Assumptions. Assumes salary is the only income, the new regime, no DA, and that the employer's EDLI and PF admin charges are paid outside CTC. Bonuses, variable pay, reimbursements, the employer's NPS contribution and the old regime are not modelled.