Salary / CTC Breakup Calculator

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How it is calculated

Using a common model, basic is taken as 50% of CTC, HRA as 50% of basic for metros (40% non-metro), employer PF as 12% of basic and gratuity at 4.81% of basic, with the remainder as special allowance. Approximate in-hand (before income tax) is basic + HRA + special allowance minus your own PF. Actual structures vary by employer.

CTC is what you cost, not what you receive

Cost to company measures what the employer spends on you, which is a larger and different number from what reaches your bank account. It includes items that never pass through your hands: the employer's provident fund contribution, the gratuity provision set aside each year, insurance premiums, and sometimes a notional value attached to facilities such as transport or a canteen. Some employers also load the variable or performance component into the headline figure at its maximum rather than its expected value. Your in-hand pay is what remains after your own statutory deductions and tax. The gap between a headline CTC and the monthly credit is routinely a quarter or more, and it is entirely predictable once the structure is broken out — which is why the useful question at an offer stage is not what the CTC is but what the fixed monthly in-hand will be after deductions.

The basic component drives more than it appears to

Basic salary looks like just one line, but a surprising number of other amounts are computed from it. Provident fund contributions are calculated on the wage base, gratuity is computed on basic plus dearness allowance, and the HRA exemption is capped by percentages of the same figure. A structure with an unusually low basic therefore increases take-home pay today while reducing provident fund accumulation, gratuity entitlement and the rent exemption you can claim. A high basic does the reverse: less cash now, more forced saving and a larger terminal benefit. Neither is universally better, and the right answer depends on whether you need liquidity or accumulation at this stage of your career. What matters is that the choice is made deliberately rather than accepted as given, because the effect compounds over years and cannot be corrected retrospectively.

Which allowances still carry a tax benefit

Under the old regime a number of allowances reduce taxable salary provided the underlying conditions are met and evidenced — house rent allowance where rent is actually paid, leave travel allowance within its restrictions, and several smaller specific allowances. Under the new regime almost all of them fall away, leaving the standard deduction of ₹75,000 and the employer's contribution to the National Pension System under section 80CCD(2). That single change alters what a well-designed salary structure looks like. In the old regime, elaborate allowance engineering had real value; in the new regime it achieves very little, and a simpler structure costs nothing. Because the new regime is now the default and most employees fall within it, the components worth negotiating have narrowed to two: the fixed-versus-variable split, and whether the employer offers an NPS contribution, which remains deductible.

The variable component is not salary until it is paid

Performance pay, bonuses and retention amounts are frequently quoted inside CTC as though they were certain, and they are not. They are conditional — usually on both company and individual performance, and sometimes payable only if you are still employed on a specified future date. Some are paid annually in arrears, which means a full year passes before any of it arrives. When comparing two offers, compare the fixed components first and treat variable pay as upside rather than income. The specific question worth asking is not what the target percentage is but what proportion of target has actually been paid out in each of the last two years, and on what basis it is assessed. An offer with a lower headline and a higher fixed component is frequently the better one, and the difference only becomes visible once the two are separated.

Statutory deductions follow rules, not preference

Several deductions are not negotiable and appear whatever the structure. Provident fund is deducted at the prescribed rate on the wage base, with a matching employer contribution that sits inside CTC. Employees' State Insurance applies below a wage threshold in covered establishments. Professional tax is a state levy that does not exist at all in several states including Delhi, Uttar Pradesh and Haryana, and follows the state where you work rather than where the company is registered — which is why two colleagues on identical packages can see different deductions. Tax deducted at source on salary is computed on an estimate of your annual liability and spread across the year, which is why it changes when you submit or fail to submit investment declarations. None of these are optional, and a structure that appears to avoid them usually just defers the cost.

What to ask before you accept an offer

The headline number tells you least. Ask for the full break-up in writing, showing basic, allowances, employer provident fund, gratuity provision, insurance and any notional items, and ask specifically for the expected monthly in-hand after statutory deductions and estimated tax. Establish what proportion of the package is variable and what proportion of target has actually paid out in the last two years. Check the notice period on both sides and whether the employer will buy it out at your current job. Ask whether an employer NPS contribution is available, since it is one of the few deductions that survives the new regime. Confirm the gratuity position and the leave policy, including whether leave can be encashed and at what rate. None of these are awkward questions; they are the ordinary content of an offer discussion, and the answers frequently change which offer is better.

The new regime changes what a good structure looks like

For most of the last decade, salary structuring was an exercise in maximising exempt allowances — house rent allowance, leave travel allowance, and a scatter of smaller components each with its own conditions. Under the new regime, which is now the default, almost none of that survives. What remains for a salaried taxpayer is the standard deduction of ₹75,000 and the employer's contribution to NPS under section 80CCD(2). The consequence is that elaborate structures now impose administrative complexity for little benefit, while two things become disproportionately important: the split between fixed and variable pay, and whether the employer offers NPS. If you are negotiating, those are the levers worth spending effort on. If you are still filing under the old regime because your deductions are large, the older logic continues to apply — so establish which regime you are in before optimising for either.

Frequently asked questions

What should I ask for beyond the CTC figure?

The written break-up showing basic, allowances, employer PF, gratuity provision and any notional items, plus the expected monthly in-hand after deductions and tax. Also the fixed-versus-variable split and what proportion of target variable pay actually paid out in the last two years, and whether an employer NPS contribution is available.

Does salary structuring still help under the new regime?

Much less than it used to. Almost all exempt allowances fall away, leaving the Rs 75,000 standard deduction and the employer's NPS contribution under 80CCD(2). Those two, plus the fixed-versus-variable split, are what remain worth negotiating.

Why is my in-hand lower than my CTC?

CTC includes the employer's PF and gratuity contributions and other benefits that you don't receive monthly. After PF and income-tax (TDS), your take-home is lower than CTC.

Is the 50% basic rule fixed?

No — it is a common convention, but each employer structures salary differently. This calculator gives an indicative split, not your exact payslip.

How is income tax deducted from salary?

Employers deduct TDS monthly based on your estimated annual income and the regime/declarations you choose. Use our income tax calculator to estimate it.

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