Why CTC and salary are different words
CTC is what you cost your employer. Salary is what you receive. The gap is not a trick — but it is large, and nobody explains it at the offer stage.
Two things sit inside CTC and never reach your bank:
- Employer's PF contribution — 12% of Basic, paid into your EPF account
- Gratuity provision — 4.81% of Basic, set aside against a payout you only get after five years
Both are genuinely your money eventually. Neither is spendable this month. On a ₹15 lakh CTC with a 50% Basic, that is roughly ₹1.26 lakh a year that is part of your "package" and absent from your account.
Then the deductions
From what remains, three things come out:
- Your own PF — another 12% of Basic. Again, savings rather than loss, but not cash in hand.
- Professional tax — a state levy, typically ₹200 a month. Delhi, Haryana and UP charge none.
- Income tax — deducted monthly as TDS.
The usual landing zone is 70–80% of CTC as take-home, and the share falls as CTC rises, because income tax is progressive.
Why Basic matters more than it looks
Basic is the base for PF, gratuity and HRA exemption all at once. Raising it:
- lowers your monthly take-home (bigger PF deductions)
- raises your retirement savings and gratuity
- raises your maximum HRA exemption, if you rent and use the old regime
A low Basic (30% of CTC) flatters the monthly number and quietly shrinks your retirement pot. Neither extreme is "correct" — but it should be a decision, not an accident.
Which regime leaves you more
The new regime has lower rates and almost no deductions. The old regime has higher rates but allows 80C, HRA, 80D and home-loan interest.
The rough rule: if your total deductions exceed roughly ₹3.75–4 lakh, the old regime tends to win; below that, the new one usually does. Renting in a metro on a high Basic is the classic case where the old regime still pays. Toggle both above, or use our old vs new regime comparison for the full picture.
What this does not model
Variable pay and bonuses (taxed when paid, not evenly), NPS under 80CCD(2), employer insurance premiums inside CTC, meal-card and LTA structuring, and state-specific professional tax. Your offer letter's component break-up is the authority — this gets you to the right neighbourhood before you sign.