The CTC vs In-Hand Gap
You expected ₹1.25 lakh per month from a ₹15 LPA offer. You received ₹95,000. The gap—often 25–35%—comes from deductions and from confusing CTC with take-home. This guide explains why your in-hand salary is lower than expected: income tax, PF, professional tax, CTC structure, variable pay, and other deductions. Understanding these reasons helps you set correct expectations, plan your budget, and compare job offers accurately. All content is focused on the causes of lower in-hand salary.
Key Takeaways
- CTC ≠ in-hand. CTC includes employer PF, gratuity, other costs—not your earnings
- Deductions 25–35%: Employee PF (12% basic), income tax, professional tax, others
- Variable pay in CTC: Bonus/commission often not paid monthly—reduces regular in-hand
- Wrong expectations: Assuming CTC÷12 or gross = in-hand. Gross minus deductions = in-hand
- Use calculator: Estimate in-hand before accepting offer. Avoid surprise
Reason 1: Income Tax (TDS)
Income tax is typically the largest deduction after PF. It is calculated on your annual taxable income (gross minus standard deduction, 80C, 80D, HRA, etc.) and divided by 12 for monthly TDS. At ₹10 LPA, tax can be ₹50,000–1,00,000 per year—₹4,000–8,000 per month. At ₹15 LPA, it can be ₹1.5–2.5L per year. Higher income means higher tax. Declaring investments and HRA reduces taxable income and thus TDS. If you don't declare or submit proofs, employer deducts more.
Reason 2: Employee Provident Fund (PF)
- Mandatory: 12% of basic salary. If basic is ₹30,000, PF = ₹3,600/month.
- Cap: If basic > ₹15,000, contribution is capped at 12% of ₹15,000 = ₹1,800 (for employers following the cap). Many private firms still deduct 12% of full basic.
- Goes to your PF account: Not lost—it's your retirement savings. But it reduces monthly bank credit.
- Employer PF: Employer adds 12% too, but that's part of CTC—you don't receive it as cash. It's in CTC but not in your hand.
Reason 3: CTC Includes Non-Cash Components
📊 ₹15 LPA CTC, what you don't get in hand
Reason 4: Variable Pay in CTC
If your CTC includes 20–40% variable pay (performance bonus, commission), that part is often paid annually or quarterly—not every month. Your monthly salary is based on fixed components only. So ₹18 LPA with 30% variable = ₹12.6L fixed. Monthly fixed ≈ ₹1,05,000 gross. After deductions, in-hand might be ₹75–80K, not the ₹1.5L you'd get if you divided CTC by 12. Always clarify fixed vs variable and payment frequency.
Reason 5: Professional Tax and Other Deductions
- Professional tax: ₹200–300/month in states like Maharashtra, Karnataka. Small but reduces in-hand.
- Group insurance: Premium recovered from salary. Typically ₹500–2,000/month.
- Meal card recovery: If provided, amount may be deducted.
- Loan or advance repayment: Salary advance, festival advance—deducted until repaid.
- Other: Union dues, welfare fund—employer-specific.
Reason 6: Not Declaring Investments or HRA
If you invest in 80C (₹1.5L) but don't declare or submit proof, employer assumes no deduction and deducts higher TDS. Same for 80D and HRA. You get a refund when you file ITR, but your monthly in-hand stays low all year. Declare at the start of the year and submit proofs by the deadline. Employer will revise TDS and your monthly credit will increase.
Reason 7: Wrong Tax Regime
If Old Regime would save you tax but employer applies New Regime (default), your TDS is higher. Inform employer of your regime choice (Form 10IE or declaration). Ensure they use the correct regime for TDS. Wrong regime can mean ₹2,000–5,000 extra deduction per month.
How to Set Correct Expectations
- Ask for in-hand estimate: Before joining, ask HR for approximate monthly in-hand. Not CTC ÷ 12.
- Understand structure: Basic, HRA, allowances, variable %. Know what is paid when.
- Use In-Hand Salary Calculator: Enter your CTC/breakup, regime, deductions. Get realistic estimate.
- Declare investments: Submit 80C, 80D, HRA proofs. Reduces TDS, increases monthly credit.
Use Our In-Hand Salary Calculator
Enter your salary breakup, tax regime, and deductions. Get an accurate in-hand estimate. Use before accepting offers to avoid disappointment.
Final Thoughts
A lower in-hand salary does not always mean lower earnings. Some deductions contribute to long-term benefits like retirement savings, while others are mandatory by law. The key is awareness and proper planning.