How this calculator works
CTC (cost to company) is everything an employer spends on you in a year. Some of that money never reaches your salary account: it goes into your provident fund, is set aside for gratuity, or is paid as a bonus later in the year. The calculator follows the same order a payroll team uses:
- Basic salary is taken as a percentage of your fixed CTC (CTC minus variable pay). Since the new Labour Codes took effect on 21 November 2025, “wages” (basic plus DA) generally need to be at least half of total pay for PF and gratuity purposes, so 50% is a sensible default.
- Employer PF (12% of basic) and gratuity (4.81% of basic) are removed from CTC when they are part of it. What is left is your gross salary.
- From gross salary we subtract your own employee PF (12% of basic), professional tax and income tax, including the 4% health and education cess.
- The remainder, divided by 12, is your approximate monthly in-hand pay. Variable pay is kept out of the monthly figure because most companies pay it quarterly or yearly.
What each salary component means
- Employee and employer PF: both you and your employer put 12% of basic into your EPF account. Many employers limit this to 12% of ₹15,000, which is ₹1,800 a month; tick the cap box if your offer letter says so. A capped PF means more cash in hand but a smaller retirement corpus.
- Gratuity: a lump sum paid when you leave after the qualifying service period. Companies that show it in CTC usually budget 4.81% of basic (15 days’ wages for every year of service). It is not paid monthly.
- Professional tax: a small state tax, at most ₹2,500 a year. In Maharashtra and Karnataka it is ₹200 a month with ₹300 in February. Several states, including Delhi, Haryana and Uttar Pradesh, do not levy it.
- Standard deduction: a flat amount every salaried person can deduct before tax — ₹75,000 in the new regime and ₹50,000 in the old regime.
- Rebate (old section 87A, now section 156): in the new regime, if taxable income is ₹12 lakh or less, tax up to ₹60,000 is waived, so a salary of up to ₹12.75 lakh is effectively tax-free. Just above ₹12 lakh, marginal relief ensures your tax never exceeds the income you earn above ₹12 lakh. The old regime rebate is up to ₹12,500 for taxable income up to ₹5 lakh.
- Surcharge: taxable income above ₹50 lakh attracts a 10% surcharge on tax (15% above ₹1 crore, 25% above ₹2 crore), with marginal relief at each threshold.
Income tax slabs used (FY 2026-27)
Budget 2026 left personal income tax rates unchanged, so the slabs introduced for FY 2025-26 continue under the new Income-tax Act, 2025.
| New regime (default) | Rate | Old regime | Rate |
|---|---|---|---|
| Up to ₹4 lakh | Nil | Up to ₹2.5 lakh | Nil |
| ₹4–8 lakh | 5% | ₹2.5–5 lakh | 5% |
| ₹8–12 lakh | 10% | ₹5–10 lakh | 20% |
| ₹12–16 lakh | 15% | Above ₹10 lakh | 30% |
| ₹16–20 lakh | 20% | Old regime: ₹50,000 standard deduction, 80C, 80D, HRA and other deductions allowed | |
| ₹20–24 lakh | 25% | ||
| Above ₹24 lakh | 30% | ||
Worked examples
Both examples assume basic at 50% of CTC, employer PF and gratuity included in CTC, no PF cap, ₹2,500 professional tax and the new regime.
₹12 LPA offer
Basic is ₹6,00,000. Employer PF (₹72,000) and gratuity (₹28,860) come out of CTC, leaving a gross salary of ₹10,99,140. After the ₹75,000 standard deduction, taxable income is ₹10,24,140. Slab tax of ₹42,414 is fully cancelled by the rebate, so income tax is zero. Subtracting employee PF (₹72,000) and professional tax (₹2,500) gives about ₹85,387 a month in hand.
₹18 LPA offer
Basic is ₹9,00,000, employer PF ₹1,08,000 and gratuity ₹43,290, so gross salary is ₹16,48,710 and taxable income ₹15,73,710. Tax is ₹1,16,057 plus ₹4,642 cess, a total of ₹1,20,699. After employee PF of ₹1,08,000 and professional tax, take-home is roughly ₹1,18,126 a month. If the same employer capped PF at ₹1,800 a month, monthly in-hand would rise to about ₹1,31,142, because far less goes into PF (though tax goes up slightly).
Frequently asked questions
Why is my in-hand salary so much lower than CTC?
CTC includes employer PF, gratuity and variable pay that you do not receive every month, and your own PF, professional tax and income tax are deducted from gross salary. For most salaried people in India, monthly in-hand is roughly 70–85% of CTC divided by 12.
Is salary up to ₹12.75 lakh really tax-free in FY 2026-27?
Under the new regime, yes, if salary is your only income. ₹12.75 lakh of gross salary minus the ₹75,000 standard deduction leaves ₹12 lakh of taxable income, and the rebate cancels the tax on it. Note that this is gross salary, not CTC.
Should I choose the old or the new tax regime?
The new regime usually wins unless you have large deductions such as full 80C investments, health insurance, HRA on high rent and home-loan interest. Switch the regime in the calculator and compare the monthly figures shown under the result.
Does a higher basic salary reduce take-home pay?
Usually a little, because PF and gratuity are calculated on basic. The trade-off is a larger EPF balance and gratuity payout. If your PF is capped at ₹1,800 a month, a higher basic changes little.
Is variable pay included in the monthly figure?
No. Variable pay and bonuses are counted in annual income for tax, but the monthly figure shows only your fixed salary. The payout line in the breakdown shows what you might receive when the bonus is paid.
How accurate is this calculator?
It uses the official FY 2026-27 slabs, standard deduction, rebate, surcharge and cess, but it is an estimate. It does not include employer NPS, meal cards, LTA, perquisites, ESIC or income from other sources, and payroll may deduct TDS unevenly through the year.
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