CTC vs in-hand salary: why your offer letter and bank credit don't match

Your offer letter says 10 lakh rupees. Your first salary credit says something closer to 73,000 a month. Nothing is wrong. The offer letter shows your CTC, cost to company, and your bank shows your in-hand pay. The gap has four parts.

What CTC includes. CTC is everything your employer spends on you in a year:

• Your gross salary: basic pay, HRA, special allowance and other allowances.
• The employer’s provident fund contribution, usually 12% of basic pay, which goes into your EPF account, not your bank.
• A provision for gratuity, paid only when you leave after the qualifying period.
• Sometimes extras: group health insurance, meal cards, a joining bonus, or variable pay paid only if targets are met.

What comes out before your bank credit. From the gross salary, four things are deducted:

1. Your own PF, usually 12% of basic. It is still your money, saved in EPF.
2. Professional tax, a state tax capped at 2,500 rupees a year by the Constitution. Some states don’t levy it.
3. Income tax, cut as TDS each month based on your regime and declarations.
4. Other deductions, if any, such as a contribution to a group insurance top-up.

A worked example. Say your CTC is 10 lakh rupees a year, with basic pay at 40% of CTC (4 lakh), and the employer’s PF and gratuity counted inside the CTC. This is an illustration; every employer structures pay differently.

Step	Per year
CTC	₹10,00,000
Less employer PF, 12% of basic	₹48,000
Less gratuity provision, about 4.81% of basic	₹19,240
Gross salary	₹9,32,760
Less your own PF, 12% of basic	₹48,000
Less professional tax (varies by state)	₹2,400
Less income tax, new regime	Nil
In-hand pay	₹8,82,360, about ₹73,530 a month

Why no income tax? On the new regime for tax year 2026-27, salaried people get a 75,000 rupee standard deduction, and the rebate makes taxable income up to 12 lakh rupees tax-free. Here, taxable income is ₹8,57,760, well inside that.

At a higher CTC. With the same structure, a 15 lakh rupee CTC gives a gross salary of about ₹13,99,140. After the standard deduction, taxable income is above 12 lakh, so tax of about ₹81,766, including 4% cess, applies. In-hand pay is about ₹1,03,580 a month.

Did you know? The gratuity figure of about 4.81% of basic comes from the gratuity formula: 15 days’ wages for every year of service, counting a month as 26 working days. 15 ÷ 26 ÷ 12 is about 4.81%. Under the Code on Social Security, 2020, in force from 21 November 2025, if allowances are more than half your pay, the excess is added back to “wages” for gratuity and similar benefits. That can change how your employer splits your CTC.

Questions to ask before you accept an offer.

• How much of the CTC is fixed, and how much is variable or a one-time bonus?
• Is the employer’s PF, gratuity or insurance counted inside the CTC?
• What is the basic pay? A higher basic means more PF and gratuity, but less in hand each month.

The takeaway. Compare offers on fixed in-hand pay plus your PF, not on the CTC headline. PF and gratuity are still your money, just paid later. To read every line of your payslip, see our salary slip guide, and to pick a regime, see old vs new tax regime.

More to read: gratuity explained, activate your UAN and see your EPF, and how salary is taxed.