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.
The 30% rule of thumb
For most salaried roles in India, in-hand pay lands between 70% and 75% of monthly CTC after PF, gratuity, and tax. If a recruiter quotes a figure without breaking it down, use that range as your sanity check — then verify with a proper calculation.
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.
Run your own numbers
ForgePlug's Global Salary Calculator breaks CTC into gross, deductions, and in-hand pay with a full breakdown — computed in your browser.
Open Global Salary CalculatorThe CTC components you may never actually receive
Gratuity is the clearest example. It sits in your CTC every year, inflating the headline figure, but it is only payable after five years of continuous service with the same employer. Leave at three years and that portion of every year's CTC was money you were never going to see. For anyone who does not expect to stay five years, it is reasonable to mentally subtract it when comparing offers.
Variable pay deserves the same scepticism. A CTC quoting a 15% performance bonus assumes 100% payout, and actual payouts are frequently below target — tied to company performance as well as your own, and sometimes discretionary. Ask what the bonus actually paid out across the last two or three years, as a percentage of target. A vague answer is itself informative.
Then there are items that are genuine costs to the employer but not income to you: insurance premiums, meal card allowances that only work at particular vendors, and reimbursements you can only claim against actual bills. A ₹50,000 annual insurance premium in your CTC has real value, but it is not fungible — you cannot pay rent with it.
ESOPs in CTC are a projection, not a number
Stock options counted toward CTC at a notional valuation are worth whatever the company is eventually worth, which may be more than quoted or nothing at all. They also usually vest over several years with a cliff. Evaluate them separately from cash compensation rather than treating them as salary.
Structure matters as much as the total
Two offers with identical CTC can produce noticeably different in-hand pay depending on how the components are arranged, because basic pay drives several other figures. Provident fund contributions are calculated on basic, so a higher basic means more going into PF — which reduces your monthly cash while increasing your retirement savings and your employer's contribution. Gratuity accrual also scales with basic.
This makes "which is better" genuinely dependent on your situation rather than universally answerable. A higher basic is better for long-term savings and for anyone planning to stay past five years. A lower basic with larger allowances puts more cash in hand each month, which matters more if you are servicing a loan or have immediate expenses.
Two things to check before signing
First, the tax regime assumption. India's new and old regimes produce different take-home figures depending on how many deductions you actually claim — the old regime rewards significant investments, rent paid, and loan interest, while the new regime offers lower rates with far fewer deductions. Any in-hand estimate you are given assumes one of them, and it may not be the one that is better for you.
Second, the clawback terms attached to joining bonuses and relocation payments. These are typically repayable in full if you leave within a stated period, often a year or two, and the repayment is usually of the gross amount even though you received it after tax. A joining bonus is best treated as a loan that converts to income once you pass the date, not as part of your first-year compensation.