CTC vs Gross Salary vs In-Hand Salary Explained

A job offer says your Cost to Company (CTC) is ₹12,00,000 a year. Your offer letter breaks that into components, your payslip lists gross earnings each month, and the amount that actually lands in your bank account is lower still. None of these numbers are wrong — they measure different things, and understanding the gaps is what lets you compare two offers or plan a budget.

The three numbers

• CTC — the total the employer spends on you: basic pay, allowances, employer PF and gratuity contributions, insurance premiums, and any variable pay. It is a cost figure, not money you receive.
• Gross salary — your earnings before deductions: basic + allowances + variable pay. This is what your payslip shows at the top.
• In-hand (net) salary — gross minus your PF contribution, income tax (TDS), professional tax, and any other deductions. This is what reaches your bank.

A worked example

Take a ₹12 LPA offer with a typical structure. Of the ₹12,00,000 CTC, roughly ₹1,38,000 might be employer PF + gratuity that you never see as cash. That leaves about ₹10,62,000 gross. From gross, subtract your own PF (~₹1,38,000 at 12% of basic) and income tax after the standard deduction — under the new regime for FY 2025-26, that's roughly ₹67,000 for this level. The result: about ₹8.5 lakh a year in hand, or around ₹71,000 per month. The headline number looked like ₹1,00,000/month; the reality is ~30% less.

Comparing offers fairly

• Compare CTC only after checking what's fixed vs variable — a higher CTC with a large performance bonus can pay less than a lower one that's fully fixed.
• Check the basic-pay ratio: PF and gratuity scale with basic, so a lower basic means lower employer benefits even at the same CTC.
• Compare after-tax, after-deduction monthly cash, not annual headline numbers.
• Factor non-cash items — insurance coverage, stock, leave policy — separately from salary.