How take-home salary is worked out
Start with the annual CTC and remove what the company pays on your behalf but never credits to your account: the employer share of provident fund and, if your offer letter includes it, gratuity. What is left is your gross salary.
From the gross salary three deductions come out each month: your own PF contribution (12% of basic, or 12% of ₹15,000 if your employer restricts PF to the wage ceiling), professional tax where your state levies it, and income tax deducted at source.
Income tax rules used (FY 2026-27)
| New regime taxable income | Rate |
|---|---|
| Up to ₹4 lakh | Nil |
| ₹4–8 lakh | 5% |
| ₹8–12 lakh | 10% |
| ₹12–16 lakh | 15% |
| ₹16–20 lakh | 20% |
| ₹20–24 lakh | 25% |
| Above ₹24 lakh | 30% |
Salaried people get a ₹75,000 standard deduction in the new regime and a rebate that removes tax when taxable income is up to ₹12 lakh. Marginal relief applies just above that point, so your tax never exceeds the income above ₹12 lakh. The old regime keeps the ₹50,000 standard deduction and allows deductions such as 80C and the HRA exemption, with a rebate up to ₹5 lakh of taxable income. A 4% health and education cess is added in both regimes, and surcharge applies above ₹50 lakh.
Example
A ₹18 lakh CTC with basic at 50% has employer PF of ₹21,600 when PF is paid on the ₹15,000 ceiling. Gross salary is ₹17,78,400. Under the new regime taxable income is ₹17,03,400 and tax with cess is about ₹1,46,300. After employee PF of ₹21,600 and professional tax of ₹2,400, take-home is about ₹16,08,100 a year, or roughly ₹1,34,000 a month.
For a fuller explanation of each salary component read CTC vs in-hand salary. If you rent a home and use the old regime, check your HRA exemption, and see how your PF grows with the EPF calculator. Employers can generate compliant salary slips straight from payroll.
Frequently asked questions
What is the difference between CTC and in-hand salary?
CTC is everything the company spends on you in a year, including employer PF and sometimes gratuity and insurance. In-hand salary is what is credited after employee PF, professional tax and income tax are deducted.
How much tax is payable on ₹12 lakh salary in the new regime?
For a salaried person, income up to ₹12.75 lakh (₹12 lakh plus the ₹75,000 standard deduction) has no tax in FY 2026-27 because of the rebate, provided there is no other income such as capital gains taxed at special rates.
Is employer PF part of my CTC?
In most Indian offer letters, yes. The employer share of PF is shown inside CTC, so it is removed before your gross salary is worked out.
How is professional tax calculated?
It is a state tax with a small monthly slab, usually up to ₹200 a month and ₹2,500 a year at most. States such as Delhi, Haryana and Uttar Pradesh do not levy it.
Is the result exact?
It is a close estimate. Your employer may use a different basic percentage, reimbursements, variable pay or other deductions, so check against your payslip.
