CTC vs gross vs net salary
Three salary figures appear on every offer letter — and they’re very different:
CTC (Cost to Company): the total employer expenditure. Includes your gross salary plus employer’s EPF contribution (12% of basic) and gratuity provision (~4.81% of basic).
Gross salary: what you receive before deductions. = CTC − employer EPF − gratuity provision. Often 85-90% of CTC.
Net (take-home) salary: what hits your bank account. = Gross − employee EPF − professional tax − TDS − any other deductions.
Typical salary structure
| Component | Typical % of Basic | Notes |
|---|---|---|
| Basic | 40-50% CTC | Taxable; drives EPF and HRA |
| HRA | 40-50% basic | Exempt up to a formula limit |
| Special allowance | Variable | Fully taxable |
| LTA | ₹X/year | Exempt up to 2 trips in 4 years |
| Medical | ₹15,000/year | Exempt (old regime) |
| Employee EPF | 12% basic | Deducted; goes to retirement account |
EPF: deduction or investment?
EPF (Employees’ Provident Fund) is 12% of your basic salary deducted every month, matched by your employer, and invested in a government-backed fund earning ~8.1% p.a. Your employer’s 12% is split: 8.33% to EPS (pension), 3.67% to EPF. After 5 years, EPF withdrawals are tax-free.
How TDS is calculated
Your employer estimates your annual tax liability at the start of each year, subtracts expected deductions (80C, HRA, etc.), and divides the remaining tax by 12 to determine monthly TDS. Submit Form 12BB with proof of deductions by February each year to reduce TDS deducted.
Use the calculator
The Salary Calculator takes your CTC and breaks it into components, showing EPF, professional tax, and TDS. For tax optimisation, pair it with the Tax Calculator and HRA Calculator.