Your offer letter shows a big CTC number, but the amount that actually lands in your bank each month is quite a bit smaller. This guide explains why — the difference between CTC and take-home pay — and how income tax under the New Tax Regime for FY 2025-26 is worked out, with a clear example.
Please note: This article is for general information only and is not financial or tax advice. Tax rules change, and your exact figures depend on your salary structure and state. Always confirm the current rules on the official income tax portal, incometax.gov.in.
CTC vs take-home salary
CTC (Cost to Company) is everything your employer spends on you in a year. It includes several things that never reach your monthly bank credit, such as:
- the employer's PF contribution
- gratuity accrual
- sometimes insurance or other benefits
Take these out and you get your gross salary. From the gross, a few deductions are made every month:
- your own PF contribution (employee PF)
- professional tax (a small state-level tax)
- income tax (TDS)
What remains is your take-home or in-hand salary. So the journey is:
CTC → (minus employer PF & gratuity) → Gross
Gross → (minus employee PF, professional tax, income tax) → Take-home
The New Tax Regime for FY 2025-26
The New Tax Regime is now the default in India. For FY 2025-26 (Assessment Year 2026-27), its main features are:
- A standard deduction of ₹75,000 for salaried people.
- A Section 87A rebate that makes income up to ₹12,00,000 of taxable income effectively tax-free.
- A 4% health and education cess on the tax amount.
The slabs on taxable income (after the standard deduction) are:
| Taxable income | Rate |
|---|---|
| Up to ₹4,00,000 | 0% |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Because of the rebate, someone with taxable income up to ₹12 lakh pays no income tax even though the slabs above ₹4 lakh technically apply.
(These figures reflect the rules at the time of writing. Verify the current slabs on incometax.gov.in before relying on them.)
A simple example
Suppose your CTC is ₹15,00,000 a year, with Basic pay assumed at 50% of CTC.
- Employer PF and gratuity are part of CTC but not in-hand, so the gross works out to roughly ₹13.7 lakh.
- After the ₹75,000 standard deduction, taxable income is about ₹12.99 lakh.
- Applying the slabs and the 4% cess gives income tax of around ₹78,000 for the year.
- Subtracting employee PF, professional tax and that income tax leaves a take-home of roughly ₹1.0 lakh per month.
The exact number depends on how your salary is structured — but this shows how a ₹15 lakh CTC does not mean ₹1.25 lakh in hand.
Why your figure may differ
- Basic pay percentage varies by company, which changes your PF.
- Professional tax differs by state (and some states do not levy it).
- Allowances and exemptions, or choosing the old regime, change the tax.
Because of these variables, treat any calculator result as a close estimate, and always check your official payslip.
Estimate yours
To see your own numbers, enter your CTC (or gross) into the free Take-home Salary Calculator. It applies the New Tax Regime for FY 2025-26 and breaks down every deduction — PF, professional tax and income tax — so you can see exactly how your CTC becomes your monthly in-hand pay.